One of the most profitable ways of investing your money involves the real estate market—specifically, flipping houses, or selling a home at a higher price than you purchased that home for. And while there are certainly risks to this tactic—as with all methods of investing your money—with the proper due diligence and careful consideration, one can strike the right balance of lowering their investment risks while increasing profits. There are five steps involved in a basic real estate investment strategy: choosing a market, securing financing, finding the perfect property, making smart upgrades to the home, and finally selling the home at a profit.

Choosing a market involves researching a real estate market that has demand; this could involve an up-and-coming neighborhood or a home in a more localized, booming economy. Securing your financing can be beneficial before a person even begins looking at specific homes, so that once they find that home to buy, they can go right away to purchase it without waiting for financial approval. After a person has found the perfect property to purchase, they can submit their offer while taking into account what upgrades to the home are necessary. It may be very beneficial to a buyer to seek out foreclosed or auction homes, as those may be sold to the buyer at a steep discount.

When negotiating a buying price, one should offer a fair value to both the buyer and seller while keeping in mind the ultimate goal of wanting to make a profit. After your offer has been accepted, creating money efficient upgrades to the home is the next step in making profit. By doing so, the buyer will have created additional demand for the home and increased the chances of making a profit. The final step is to sell the house at a profit, and this can be more easily done by investing the upgrades necessary to increase demand. By selling the home at a higher price than it was bought for, the original buyer will have made profit.

Key Points:

  • 1 Making money on flipping houses you will need to be diligent and have a system that mitigates risk.
  • 2 You will need constant education and sound practices in order to make a living in flipping houses.
  • 3 Being aware of the upgrades that are in demand in your market is paramount.

You can’t make money on a flip (or even pay back your hard money loan with interest) if you can’t sell the home for more than you bought it.