Flipping houses can be extremely lucrative. Some investors have seen net returns of more than 15% in as little as six months.
A flip is any real estate investment project in which a buyer acquires a property at an attractive price and adds the necessary improvements to increase the value (and ultimately the sale price) of that property. Flipping became popular in the 1980s and 1990s when a shortage of new homes gave rise to people buying older distressed properties, renovating them, and selling them.
Initially, only seasoned real estate professionals flipped homes. But, in recent years, flipping has become a mainstream source of ongoing income for people without 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. 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 more than $73K. 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.
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 market 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.
US home sales are trending up, 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 end 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.
- Factor in 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.
- Forecast expenses accurately on the 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?
Crowdfunded real estate investing is one of the best ways today to flip houses. Crowdfunding is when 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.
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
When looking for a crowdfunding investment platform, there are multiple factors to consider, including the company's reputation and experience, the people who will be managing the renovation, and communication with investors.
It’s also important to understand whether your investment is an equity investment (one in which you own a share of the property) or a debt investment (in which you simply loan funds to the property owner). Debt investments provide a set rate of return, but equity investments offer greater return potential because you get to share in the profits.
Platforms that are transparent about how much other investors have made on flips are safer than those that don’t provide this information or only show their best projects. 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, a California-based real estate investment company, has removed much of the risk of house flipping. You can leverage our experience and knowledge to increase your return potential on flips. Here at Gatsby, 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 crowdfunded property investment. Syndication works basically the same way as crowdfunding, but it uses a more stable ownership structure and offers equity shares to investors. You will be made a member of the LLC that owns the property, giving you a stake in the underlying real estate.
When you invest with Gatsby, 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. Gatsby does extensive research and leverages industry connections to acquire desirable properties with impressive potential. We use our experienced team of designers, contractors, and builders to create quality projects with high profit margin forecasts.
Our online platform provides access to 24/7 updates on your projects. Plus, our website gives you access to a growing education center where you can learn all about real estate investing, giving you confidence while you build your real estate portfolio.
And diversification is easy. If you have $50,000 to invest in real estate flips, for example, you can spread that amount across multiple projects, ensuring consistent average returns with mitigated risks. Gatsby also offers different types of real estate projects if you would like to diversify your portfolio into investments other than house flips.
Rather than "going it alone" or finding your own investment partners, join a crowdsourced flip with Gatsby Investment. You can streamline the process, diversify your portfolio, and minimize risk by investing with us.