Pros and Cons of Real Estate Flipping
Real estate flipping is a term used to describe the purchase of houses and real estate developments and quickly engaging in sales to resell it. This fast action of selling it again is known as ‘flipping’. The main catch of real estate flipping lies in the profits that can be easily gained when buying these properties at a significantly low price and selling them off at a much higher price. The intermittent gains are often found to be lucrative, which is a major appeal of real estate flipping to agents and homeowners alike. However, like any venture, there are advantages and disadvantages which should be given critical importance to.
ADVANTAGES OF REAL ESTATE FLIPPING
REJUVENATION AND RESTORATION OF OLD ESTATES
Older neighborhoods at times have the tendency to look shabby in exterior appearance and often become increasingly unpopular amongst real estate agents and potential homeowners. An intelligent way devised by real estate agents is to engage in the rejuvenation and restoration of these homes. The works begin right after purchasing these houses cheaply and selling them high to new homeowners. The old homes undergo extensive makeovers to look more appealing and to attract more buyers. The cost is borne by such agents but this sum is quickly absorbed into the potential profits that can be accrued as part of the final sales.
HIGHER PROPERTY VALUES
When a home undergoes renovation and restoration works, the property value of that home tends to increase while also having a similar impact on neighboring houses or even possibly the entire neighborhood. This is then of great importance to homeowners in the vicinity should they wish to sell their homes. Real estate flipping is not just then a real estate agent’s venture, homeowners also stand to benefit by pumping in a sum of money to mark up the value of their property before selling it off for a profitable amount.
DISADVANTAGE OF REAL ESTATE FLIPPING
ECONOMIC BUBBLE
The biggest worry about real estate flipping would indefinitely be the creation of an economic bubble centered on housing and housing prices. When borrowing rates to finance the purchase of a home is low, there is a great demand for the purchase of real estate. Many even buy these homes without having an actual intention to occupy them. With real estate flipping, there is an invisible bubble that is created, pushing the prices of homes to sky-high. While profits can be earned in a fast manner, the onset and bursting of an economic bubble arising from real estate prices and real estate flipping have drastic effects on the entire housing market, to the dismay of many, hitting the common man with the hardest impact.
