Summary:House flipping is the most active, hands-on way to invest in real estate. In a house flip, an investor purchases a home, makes changes and renovations to improve its value on the market, and then resells it a higher price. House flipping is generally short-term, because the longer the investor owns the home without leasing it to tenants, the less money they will earn when they sell it. Investors can repair or renovate the home to increase its sale price or sell when its value in the housing market increases.
If you watch HGTV, then you have probably watched a house transformed from rags to riches in under 30 minutes and sold for a sizeable profit by house-flipping pros. In these shows, house-flippers buy a home that they believe to be underpriced, add value through renovations — such as replacing countertops or flooring, tearing down walls to change floor plans, or adding completely new square footage — and then sell the home at a higher price, turning a profit.
While house-flipping is exciting, it also requires deep financial and real estate knowledge to ensure that you can makeover the home within time and budget constraints to ensure a profit in the housing market when finished. The success — and the financial burden — of a house flip falls entirely on the investor. You also need enough cash for a down payment and/or good credit to secure a home loan in order to buy a property before another flipper.