Can Real Estate Investors Still Make Money Flipping Properties?

By Author: Alexandria Anderson
Total Articles: 46
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Flipping, or the quick reselling of a property that one has just purchased, is a controversial practice. That is because individuals attempting to flip have often engaged in some very bad practices and ended up angering both the buyer and the seller.

See, the flipper is neither the buyer nor the seller, though he may play the part of both. Some particularly gutsy flippers talk to the owner of a property and a prospective buyer. Now this buyer thinks the flipper owns the property and gives him the money for it. The flipper then takes the asking price out of this money and gives it to the seller, pocketing the difference. He has never invested a penny of his own money. What he has done, effectively, is sold property that isn't even his. If it goes well, the true buyer and seller never find out about each other.

If it goes badly and they do find out about each other, then there will be some very awkward moments to say the least. The buyer is angry because he feels if the flipper was able to sell his property at $110,000, when is only asking for $90,000, then he is the one who should benefit from the inflated price. ...
... The buyer, on the other hand, is angry that he is being asked by this third party for $110,000 when he could have gotten the property for only $90,000.

The clumsy flipper potentially angers everyone, and that is not what should happen in a business deal. Everyone should walk away from a deal thinking that he got just what he needed from the exchange. No one should feel as though someone is trying to swindle them.

That doesn't mean that there isn't a legitimate way to flip properties, a way that doesn't leave everyone's feathers ruffled. According to Ken McElroy, author of The ABCs of Real Estate Investing, there are corporations that do it, and that is pretty much what it takes. Corporations that flip buy a property from a seller and then go on a whirlwind communications campaign to everyone on its list. This costs money, but the corporation has access to so many people that it isn't long before someone buys the property. It may even happen that very day. That is flipping, but both the buyer and the seller come out of the deal happy. The company doesn't have to keep the buyer and seller from finding out about each other.

It is amazing how many people are out there trying to be a middleman between buyer and seller, who are trying to sell property that they haven't actually purchased. If the investor follows one simple rule—actually buy the property before you try to sell it—then he can avoid a lot of nastiness. It is amazing how many people are out there trying to be slick and sell before they buy.
Each investor should ask himself which is the best approach to real estate for him, personally. Trying to be a lone flipper is an approach that is rife with limitations, and it doesn't allow for the development of a property into something that is genuinely worth more than the investor paid for it. It doesn't allow the flipper to actually be an asset to the community, but does allow him to artificially inflate prices. However, it does work for some people. Each investor has to come to terms with those questions for himself.