The short answer is that there is tremendous potential for return on your investment in as little as six months if you choose well. Some investors have seen returns of more than 15 percent.
A flip is any real estate investment project in which a buyer picks up a property at an attractive price and then puts in the necessary improvements to increase the value (and ultimately the sale price) of that house. Flipping became popular in the 1980s and 1990s. A shortage of new homes gave rise to people buying older homes and then updating and reselling them.
Initially, only seasoned real estate professionals flipped homes. But, in recent years, flipping has become a mainstream source of ongoing income for people who had no prior experience in real estate investing or remodeling.
The amount and payback period of your flip investment is a function of:
- How much you put into a deal or multiple deals
- The complexity and cost of a rehab project
- Sales rates and home values in the community in which the property or properties are located
Flipping profits are at an all-time high, according to real estate analysts ATTOM Data. Low mortgage interest rates and a real estate inventory shortage have created a demand for homes. Experts believe that fixing and flipping will continue to be a great real estate strategy well into the future.
The average gross profit from a home flip is currently upwards of $60K. Whether you're investing solo or with a group of investors, as well as the selling price of your home (minus the cost of upgrades and repairs) can have a huge impact on that number.
As the Mortgage Moratorium comes to an end, more than 8 million people face foreclosure. They may need to leave their homes to find more affordable options, releasing more inventory to real estate investors. Some of these homes may have fallen into disrepair due to financial hardship, creating an opportunity to refresh them and deliver a better property to their new buyer.
House flips are a great choice for investors who want to make a short-term commitment with the potential to deliver significant profits. But how a property is chosen and the process for rehabilitating and re-selling it can make all the difference between great returns and massive headaches.
Why is Flipping a Great Form of Real Estate Investing?
Investment experts advise people to diversify their portfolios but agree that having property among your investments is a sound move, especially in today's economy. Unlike stock investments, you can see a tangible place where your money is going.
Real estate investing today is extremely popular, even if you're a first-time investor. Everyone needs a place to live and, if you choose the right deals, you can see significant profits.
In a recent list by RealWealth, crowdfunded real estate investing was listed as one of the 20 safest investment forms in 2021. That means that a company pools funds from many investors in exchange for a portion of one or more real estate projects. Your risk is minimized, and your reward can potentially be huge. You do not need to be a real estate or investment expert to benefit from the crowdfunding system.
U.S. home sales are up dramatically year-over-year, so if you invest wisely, you can be assured that a market exists for your investment properties.
Investing in flips delivers a relatively rapid return. These homes are purchased with the express purpose of improving and selling them, so your cash is not tied up for long periods of time.
Things to Consider Before Flipping
Reality television has glamorized the flipping and rehab process. We see people with little real estate or construction experience finding a great deal, demolishing and rebuilding it with a smile on their faces, and reaping huge returns. The reality is very different, and those people who don't have extensive experience with flips wind up paying the price.
When you attempt to manage your own house flip, you must:
- Find a property that has potential. That involves knowing about comps and the neighborhood's potential and issues
- Consider the location, you can't just flip any old house and expect a profit, location is always key
- Also consider the location in relation to your own home, because you will need to be onsite to oversee work if you're flipping on your own
- Secure accurate pricing on any rehab and construction work that needs to be done
- Be familiar with local laws related to construction
- Secure funding
- Manage the entire renovation process, which can be time-consuming
- Deal with any issues that arise during the flip
- Find the right buyer and close the deal quickly to start to see profits in as little time as possible.
All of that takes time, so you need to look beyond financial return when evaluating the price of a flip.
If you decide to team up with other investors to flip a house, you may need to find those investors and communicate regularly with other people as the project progresses. Dealing with multiple investors on your own can be complex and, especially if they are friends or families, can strain relationships. Multiple people involved in decision-making can slow down a project, and one person or entity still needs to take responsibility for the project outcome and returns.
What is Crowdfunded Flipping?
Crowdfunding real estate investing is one of the best ways today to flip houses. You are part of a group of investors (or syndicate) who share the risk and return of a house flip.
It works for people looking to diversify their investments, first-time investors, short-term investors, and anyone who wants to be part of a community that makes flipping easy for the investor.
Even if you've flipped homes on your own before, you should consider a crowdfunded system of house flips. You won't have to bear the entire cost of the flip, and you may see a healthy return without any of the aggravation and time commitment.
What to Look for in a Crowdsourced Investment Platform for Flipping
The company's reputation and experience that's selecting the homes to flip, the people who will be managing the renovation, and communication with investors are all critical considerations when assessing potential platforms for your money.
Understand whether your investment is an equity investment (one in which you own a share of the property) or debt investment (which is a loan). If you own a share of the property you are connected to a tangible asset. If you own the debt investment, you are effectively loaning the money to the investment company.
You want to know that the company you're working with has a wide range of real estate opportunities so that you can diversify your investments.
Full transparency about how much other investors have made on flips is critically important. Does the platform give you information about those projects, and provide you an opportunity to assess upcoming opportunities? It is your money, and so you should expect that the investment platform you're considering has the expertise, integrity, and transparency you need to feel safe.
Flipping Houses with Gatsby Investment
Gatsby Investment has removed much of the risk of house flipping and uses experience and knowledge to help our investors realize the best returns possible. You instantly become part of an investment community led by experienced real estate professionals.
Why the Syndication Model is a Great Alternative for Home Flippers
Syndication models like the one offered by Gatsby Investment are an innovative form of crowd-funded property investment. You don't have to do the work to find a property, find other qualified investors, or secure funding. You don't need to worry about any of the details of rehabbing. For example, Gatsby Investment does extensive research and leverages extensive experience to select properties that will sell faster in communities with the highest potential for profitable sale.
Diversification is easy. For example, if you have $50,000 to invest in real estate flips, you can spread those dollars across multiple projects, ensuring a consistent average return with risk spread across projects. This means you don't have to put all your eggs in one basket. Gatsby also offers different types of real estate projects if you would like to diversify your portfolio into investments other than house flips.
Your time and efforts aren't spent on your own research and overseeing contractors. We take care of all of that for you. In addition, the other investors in your deals are properly vetted by us, so you don't have to assume more of a financial management burden than you want. You, and other investors, gain access to projects that would otherwise be unattainable.
The web platform provides access to 24/7 updates on your projects. Plus, our website gives you access to a wide range of information and facts about real estate investing, helping you build confidence while you increase your investment portfolio.
Flipping is here to stay and may, in fact, be on the upswing as new construction, and low mortgage rates create new opportunities.
Rather than "going it alone" or finding your own investment partners, crowdsourced flipping with Gatsby Investment is one of the best alternatives today. You can streamline the process, diversify your portfolio, and minimize risk by investing with us.