The practice of purchasing investment property and quickly selling it for a profit is commonly known in investment circles as flipping. In some cases, an investor may simply be able to acquire such a property at a steep discount well below market value, while in others the investor may have to invest some of his or her personal effort (sweat equity) and/or creativity (intellectual equity) into the property to raise the propertys value after it is acquired. The practice of flipping properties has been around for ages and many experienced investors make an extremely lucrative living by just flipping one or two properties a year.

While flipping has proven to be an effective real estate investment strategy, it is not without risk (as with any other investment strategy). One of the largest risks involved with flipping is the chance that an investor may not be able to sell the newly-acquired investment property at a price that is high enough to cover any costs that went into the acquisition and improvement of the property and provide a worthwhile return. Another is the chance that the time required to improve and sell the newly-acquired investment property might erode the investors return through greater-than-anticipated carrying costs. While these risks were hardly large considerations for Southern California flippers of yore (prior to 2006), they have a renewed significance today.

Prior to 2006 in Southern California, the wind of market value was at the flip investors back and any mistakes that he or she made were quickly covered up by appreciation. In other words, time was on our side and any delay in the flipping process just meant that the improved property would be that much more valuable when it finally came time for remarketing.

Today, the flip investor is faced with an entirely new set of circumstances that makes flipping more risky. Interest rates have risen substantially and property appreciation has slowed dramatically (certain types of properties in certain areas have even gone down in value), signaling that the wind of market value is in the flip investors face. This does not mean that flipping properties in the current market is necessarily a bad idea; it does mean, however, that careful planning, forecasting, analysis, and project management are essential to keep these types of investments from coming back to haunt the investor.

The Epifany Properties team has a vast amount of experience in this area of real estate investment in both stable and declining markets. Please contact us for more information.