Tips on How to Profitably Flip Vancouver Real Estate
One way some people like to make extra income is to buy and flip real estate for a profit. There are a lot so-called gurus who make this enticing as a quick-get-rich money scheme, but you can get jammed up real bad in a financial bind if you don’t know what you’re doing.
Flipping real estate for profit is very doable, but before you take the plunge here a few tips to get you started.
Do Your Research
Your first important step is to be very clear about your goals and whether you plan to do either of the following:
- “Quick Flip” (buy, fix-up and sell a property in a year or less)
- “Long Flip” (buy, fix-up, rent property and then sell several years down the road).
Any property you are thinking of buying has to answer one vital question – “Why will this property be worth more after I buy it and fix it up?”
If you’re looking for a quick flip then you want a property that is clearly undervalued in relation to the neighbourhood. You also have to study the and analyse your market before you take the plunge because some price range properties are going to moving faster than other price range properties.
You have to know what price range of home you need to focus on and which markets to concentrate on when looking for that right property to buy and flip.
You might want to look for any neighbourhood which may have had the reputation of being considered “run down”, but is experiencing a process of rejuvenation.
Understand the Real Estate Cycles
There’s no real estate crystal ball that will guarantee that prices and interest rates will either rise or fall, so you have to be prepared to consider a worst case scenario. You can take your chance with what the real estate pundits are predicting, but just remember that they don’t always get it right.
Although things might appear rosy now, just remember that the Vancouver market is tied into the Canadian market which is tied into the American and the global market. What happens in Asia, Europe or the U.S. can turn the whole market upside down quickly.
Like they use to say way back when “Don’t put all your eggs in one basket.” That means you have to have to some reserve cash on hand in case things go south.
Quick Flip Versus the Long Flip
A lot of people who haven’t done their research have been influenced by real estate get-rich schemes and the quick flip, get the idea that all they have to do to make some money is buy a house, fix it up and then flip it quickly for a nice tidy little profit.
Although the quick flip is tempting for many there are some significant drawbacks. You have to remember that you will have to invest the money to adequately fix the home up so it will entice someone to buy it. This means you have to spend some more money and put in a lot of elbow grease of your own which comes off any profit you might make.
The other big pitfall that many people don’t realize about the quick flip such if you buy then sell a home in under a year is that you also have to pay taxes on any money because it is seen as income.
However, on the long flip, you reap the benefits of a greater profit not only from the renovations you make, but also on rental income which you derive until the time is ripe to sell the home. You also have the additional advantage of reaping a greater benefit from additional profit you can make from property appreciation over a longer period of time.
If you keep a home on hold, then when you sell it your profit won’t be taxed as income but will be viewed rather as capital gains which is less.