If you are like most people interested in real estate investing, you must have seen one of those reality shows on house flipping on cable television at least once: “Property Ladder”, “Flip That House”, “Flip This House”, etc.

The concept of flipping, as I’m sure you know, didn’t start with these informative shows, but has been around for at least 30 years. It wasn’t until a few years ago, with the onset of reality television programming and the real estate boom, did flipping become more popular. More and more people began to see the potential earnings from buying a run-down house, fixing it up and flipping it as a quick sale. House values were rising, mortgage rates were low, and it seemed as if (thanks to many sub-prime lenders) you could get a loan at the drop of a hat.

Fast forward to 2008.

Things sure have changed in the real estate and mortgage lending industries! Lenders are more strict now than they ever have been and real estate market values have gone down tremendously. And even if you were able to get a loan with an incredible rate, is the house even worth it anymore? The answer is: YES…. and NO.

Let’s start with the ‘NO’ answer.

In recent years, when the real estate market was on the rise, you could have bought a fixer-upper, renovated, and flipped it with a net profit of $50k or more, all within a couple of months. Heck! You could have bought any house and it’s value would have gone up in a few months without even doing anything to it at all! But it doesn’t work like that any more. First, with the market values the way they are today, you would really have to get an exceptional deal on a property. Lenders are looking to minimize their risks, and so, for investment properties, you’re now going to have to cough up a hefty down payment. Factor in the rising cost of oil, which is passed onto consumers who indirectly pay for it in the rising cost of materials and lumber, those “little” renovations begin to add up quickly. Before you know it, your expenses in acquiring and renovating that property have become pretty big, and a quick flip won’t give you the return on investment you thought it would.

BUT WAIT! THERE’S MORE!

On the other hand, short sales are on the rise these days, and property values are at record lows so now IS a great time to find a bargain property. Yes, you’ll have to pony up a hefty down payment, and yes, inflation is creeping up on us, but if you have the cash, and more importantly, the patience, you can easily find a steal of a deal on a decent home that may not even need too many renovations. Play like farmer Joe and wait for harvesting time on your crops– it may take a couple years or more, but I promise, you’ll get nice return on your investment. In the meantime, practice your skills at property management on the investment, maybe even cash-flow from it, and quicker than you can say “You’re Fired!”, you could be the next Donald Trump!

So, is the fad to flipping over? I say no. It may have slowed down somewhat, and it may not be as glamorous or as exciting as television makes it appear sometimes, but flipping is definitely here to stay.

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