There are two definitions of “flipping” when it comes to real estate. The first (and original) definition means buying a property and quickly reselling it for a profit. Usually, the property is distressed in some way, and you’ll be reselling it to a rehabber who will renovate the property. The rehabber will then sell the fixed-up property to a new homeowner.
This is also called wholesaling – buy low, sell a little higher. It’s the Great American Way, and it’s legal. In fact, the Internal Revenue Service will classify you as a Real Estate Dealer if you do this for a living. If they say it’s legal, it absolutely, positively must be legal.
The second (and newest) definition of “flipping” is purchasing the distressed property and rehabbing it in as short of time as possible. This usually means hiring a contractor and having their crew repair the house under the investors supervision. Then, once the property is rehabbed, it is sold. This newest definition has only recently come in to existence due to popular programs, such as "Flip This House", on home and garden channels.
This definition is quite frequently used interchangeably with "Rehabbing" or "Retailing".
For more information on flipping, be sure to check out the articles which provide great tips and insight to the world of flipping! |
