Realty 411 - Is Flipping Property Good for Your Wealth?
Is Flipping Property strategy by Kathy Fettke, CEO of the Real Wealth Network Good for Your Wealth?T V shows make have had to put down ﬂipping houses $13,000 to buy real estate. look easy, and Today that property bootcamps would be completely paidmake it seem extremely off, and would have moreproﬁtable every time. than tripled in value.But in reality, new inves- What’s more: you’d betors often get burned on earning at least $13,000their ﬁrst few deals. rental income per year! Everyone wants to The same power of multi-make a quick buck, and plied growth is availablein theory, ﬂipping could today simply becausebe a way to do that. But prices are so low.please heed this warn- Real estate boughting: Flipping is not for today could very well beeveryone! worth more than three Here are some tips to times its value 20 to 30help you decide if it’s for you. years from now. There is no other investment that delivers cash ﬂow andThe Real Costs of Flipping Property • Flipping requires hands-on involvement capital growth like long-term real estateThere are many hidden costs that new and most working people don’t have the investments do.investors fail to calculate on the outset: time. Flipping is a job. Buying and holding• The cost of funds borrowed to purchase • Successful ﬂipping requires that you property is an investment.and/or renovate the property only invest where you physically live. A• The cost to sell, including agent fees and buy & hold investor can invest anywhere, Kathy Fettke is the founder and CEOclosing costs — estimate 10% have many investments working at the of Real Wealth Network “The Real• Holding costs, including on-going prop- same time, and still make money Estate Investors Resource.”erty taxes, interest charges, and insurance doing other things. Members have access to free• Cost overruns — always allow a 10% • A cash ﬂow rental property education, resources, andcushion for the unexpected can yield over 10% return after referrals to turn-key rent-• Sales price variations — allow 10% less all expenses, without the risk of al properties aroundthan what you’re expecting rehabbing and trying to sell the United States.• Estimated proﬁt — 10% at a minimum at the right time. Real Wealth Network(and if this is all you’re expecting, there • Rental has over 8,000are much lower risk investments out income is members, so thethere!) much more shear power• Short-term capital gains taxes — poten- favorably of numbers al-tially 35% of your proﬁt. Always talk to taxed, and lows the groupyour CPA before making any investment. capital gains can be to acquire avoided upon sale if a properties at As you can see, after you calculate all replacement property is huge discounts.repair costs, you’ll still need to be able to purchased according to Membership isacquire the property for less than 60% of IRS 1031 Exchange Rules. free. Kathy is alsocurrent market value. • Growth over time, for both host of The Real Is it possible? Yes. Is it easy? No. rental income and capital Wealth Show on KABC growth, works the same as Los Angeles and on iTunes and is Buy & Sell VS Buy & Hold compound interest; it’s one of a regularly interviewed guest ex- At Real Wealth Network, we advocate the most powerful tools in an pert on ABC, CNBC, CBS Marketbuy & hold investing for the following investor’s arsenal. Watch and NPR.reasons: Thirty years ago, one would