The key to making money in any investment is to buy low and sell high. In real estate, some people are able to turn a handsome profit by buying property on the way up and sell it before it reaches the top. Unfortunately, when the value tops out, someone is going to get burned.
In the areas of the country where the real estate bubble has burst, property values are dropping quickly. Some who bought property expecting to turn a quick profit are now facing foreclosure. This means that opportunities exist for those with enough capital to sieze the day and pick up property at deep discounts.
Many times, owners who are not broke, but could end up that way if they cannot sell, will sell property for a significant loss to avoid foreclosure. They are anxious to keep their credit rating as strong as possible. This means that if they can absorb thousands of dollars of losses getting a little something is better than losing it all.
If the house has been rehabbed, you may be able to buy the house at less than the original price and get the extra work thrown in the deal. This means that you can do just a little finish work and have the house ready for resale. You do not have to make the amount of the former owner because you have almost no investment above the purchase price. Anything that the house brings above commissions and cost is in your pocket.
The trick is to not get greedy. In any investment, pigs go broke. Target a reasonable profit for the investment and length of time it was held. If you can make 10%, it will be worth the effort. If the house is above a half million dollars, you may even be able to settle for a 5% return.
Once a house has been foreclosed and repossessed, you can often get the property for around ½ to 2/3 of its value. For houses in slightly rundown condition, the price can go even lower. With good credit or a pocket full of money, you can buy these houses from a friendly bank and sell them without even touching the house. Because banks cannot legally hold the property more than a set amount of time, they are usually hot to get them off of the books. This is good for you.
The key to making money is to sell them fairly quickly and keep your money moving. You profit on each house and move on. Many people make a reasonable living by flipping four or five houses per year. The first one can be a little scary, but after you get used to it, it is a great job.
