Pros and Cons of Flipping Real Estate
There is no doubt that a major benefit of flipping real estate can be the profit that can be made, and many a self made millionaire will tell you that is how they have made their fortune. That profit, of course, is the number one “pro” of buying real estate just to improve and sell the property quickly at a substantial profit.
The major “con”, or disbenefit, occurs when your planned investment turns sour in one way or another. Maybe the market turns downward just after you buy, or you discover that the area you have bought in has problems that you were never made aware of. Or you have set about doing some major improvements or renovations, and found that the true cost turns out to be way above your original estimate. These things happen, only with experience they should happen less and less if you become a serious real estate investor. Always remember, that all high profit investments bring with them an appropriate high risk.
If things do go wrong in the early stages, all is not necessarily lost. After all, you still own the property, and over time it will probably benefit from capital growth, as prices usually do bounce back, even if it is a few years later. If you make regular real estate purchases over the years, then returns will balance out and long term capital growth is likely. Then, next time there is a property boom, you may sell your own properties at what you think is the peak. That will be the time to reap your rewards.
In the meantime, you do have options that can bring in some income rather than capital growth. Firstly, you can just rent out the property until such time as the real estate market situation improves. While renting can also bring risks if you rent to bad tenants, if managed well it can also bring in a good long term, and regular, income. Perhaps better still, leasing to buy may be a way of bringing in some early income, while having a ready and willing buyer available when the time is right for buyer and you, the seller. This is a bit more complex contractually, but with good professional guidance is definitely an option.
There are less obvious benefits of flipping property. If you are doing it as a full time business, then, like all business owners, you have the freedom that self employment brings. You are working for your own good, your own financial future, rather than for someone else. For many of us, that is a wonderful advantage of having your own business, and it applies to real estate investment as much as any other. It is a very satisfying one at that.
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