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"House Flipping Business: Buying, Renovating, and Selling Houses"

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Real estate has always been referred as the pinnacle of investments, simply because of the balance of its safety and high potential returns more than any other type of investment.

Although the real estate market has been hit hard by the recent U.S. and global economic disaster, it has since bounced off again to be the leading investment opportunity all around the world.

There is one form of real estate investment which is relatively popular because it lowers the entry barrier and the required startup investment: the house flipping business.

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House flipping is basically buying an old property at a bargain, and selling it with a margin after you renovate it. Although seemingly a very simple concept, there are several things you must consider before starting this business:

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1. Investment Requirement and Calculating BEP
Buying and holding off a property, as well as renovating may require a lot of money. If you are buying the property through some form of loans, you will need to include the interest in your break even calculation.

Even when paying cash, holding a property have its costs, such as taxes and utilities. To calculate the BEP, you need to factor in the total cost of property acquisition, the total cost of holding, and total cost of renovation.

2. Consider Acquiring the Necessary Skill
By doing the renovations by yourself instead of hiring a professional, you can save a lot of costs. Consider getting a carpentry and construction skill, or partner up with those who already have the skills.

The same thing may apply to hiring realtors. Consider getting the necessary skills to sell the house by yourself to maximize profits. As your reputation grows, the process of selling houses will become much easier.

3. Location, location, location
This is a real estate advice you hear all the time and still stays true as the most important factor to success in a real estate business. However, as good as any location is, you must balance it out with the price of the acquisition. For example, acquiring a $60,000 house in a $100,000 average neighborhood might be a bargain initially, but you won't be able to expect to sell it at $150,000 after renovation, so you'll need to keep the holding and renovation cost below $40,000 to barely make a 10% profit.

Be patient in finding the right property to invest in to maximize your profit potential while mitigating the risks.

4. Patience
Take the time to wait for the right property, the right contractor to do the jobs you can do yourself, and the right realtor if you are unable to sell by yourself.

Selling a house might take time, so minimize all the costs and be patient while maintaining some liquidity. If you are not patient and only able to sell the house for 10% profit margin, you're better off getting a better paying job.

Earning Potential

With the right cost management, patience, and instinct for a good location, you can make decent profits selling houses. Sometimes a renovated house can go up in price as high as 1000%. Remember to calculate all expenses before deciding on a selling price. As much as it’ll tempt you to take the offer of fresh cash, in the end this is a business so your aim must be profits.