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How the Concept of Flipping Homes Has Changed Over the Years

Perhaps the popularity of the multiple television shows has changed the flipping home terms.

There's no doubt that flipping houses can make you money--sometimes quite a bit of it. I've learned that from longtime personal experience. However, you have to know what you're doing from the very beginning if you want to succeed, and over the years, I've seen the actual definition of flipping houses begin to change.

If you've been at this as long as I have, you're bound to be a little confused by the modern usage of the term flipping.

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Years ago, flipping a house meant buying it well below market value and then selling it quickly--sometimes so quickly that the home was never transferred into your name. Needless to say, you had to get a tremendous deal from a seller who was under extreme duress to make that sort of flip possible. Often the houses didn't even need any fixing, although they were often sold at discount prices to people who were going to rehab them and then sell them for full retail value.

In those days, flippers (who were also known as quick turn investors) looked to buy and resell as many homes as possible, and they were happy to make $5,000-$10,000 on each transaction.

A rehabber (as modern day flippers were known back then) took homes and remodeled them for resale. They often made more on each home, but it took longer, which was generally OK, because the housing market was rising fairly fast, which gave them greater profits at the end of each project. Holding a property for a year also allowed them to declare their profits as long-term capital gains, thereby lowering their tax liability.

There were also other types of investors who specialized in pre-construction flipping strategies. Their technique depended upon having the real estate market appreciate fast enough for a builder's home to be worth considerably more than the purchase price by the time it was completed. There was a time when that strategy worked quite well when the market was going up exponentially a few years back, but that's no longer the case in most areas of the country.

Even as the market begins to slow down, there's still money to be made in flipping houses if you know what you're doing at all times. However, now more than ever before, it's imperative for you to know your market thoroughly, to have a strong exit strategy before you ever make an offer, and have enough cash on hand to complete the process. There's an old adage that says knowledge is power, and there's no doubt that knowing your stuff when it comes to flipping homes will give you the power to succeed.

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