Real Estate Investment FAQ’s
What is Flipping?
Flipping is a term used primarily in the United States to describe purchasing a revenue-generating asset and quickly reselling (or “flipping”) it for profit. Though flipping can apply to any asset, the term is most often applied to real estate and initial public offerings (IPOs).
Profits from flipping real estate come from either buying low and selling high (often in a rapidly rising market), or buying a house that needs repair and fixing it up before reselling it for a profit (“fix and flip”). Under the “fix and flip” scenario, an investor or flipper will purchase a property at a discount price. The discount may be because of:
The property’s condition (e.g., the house needs major renovations and/or repairs which the owner either does not want, or cannot afford, to do), or
The owner(s) needing to sell a property quickly (e.g., relocation, divorce, pending foreclosure).
The investor will then perform necessary renovations and repairs, and attempt to make a profit by selling the house quickly at a higher price. The “fix and flip” scenario is profitable to investors because the average homebuyer lacks the time and funds to repairs and renovations, so they look for a property that is ready to move into. Also, most traditional mortgage lenders require the home to be habitable with no significant repairs.