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Can Flipping Save You Money?
By Priya Jestin, Staff WriterAgreed a 1031 exchange allows you to save by deferring capital gains taxes but is it a get-rich-quick scheme? If some recent books and websites are to be believed, there are numerous people who are profiting from this new do-it-yourself industry: “flipping” houses. What does flipping mean? Well, to put it simply, it involves buying real estate at below market rates and reselling them at a profit.
As a theory it sounds foolproof. But the problem is that it is good only as theory. And there is no dearth of people, books, and websites that will tell you how easy it is to make money by flipping property. All you need to do when you are ready to sell your property is, go to foreclosure auctions, and buy a house or two below market value. Then, do a few repairs to make it seem as good as new, and put it back on the market. This way you can now command the market price for the replacement property.
Reality is not all that simple. What happens is you may perceive a house as a bargain and purchase it. But then when you go looking for buyers, you may have a big problem. So, you have to go out of your way, spend money you can ill-afford to lose and then sell the house at a loss.
Well I know it is a bit too negative a scenario. What I am trying to say is that investing in real estate can make you money only if you take the time to do your homework.
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