Is Flipping Really Investing?
My definition of real estate investing is buying and renting for the long term. Flipping is also considered investing by many people, but I consider flipping houses to be a construction or construction management business at best, and simply speculation at worst. Flipping is 100% about buying a property at the right price, completing any necessary repairs and upgrades as quickly and cost-effectively as possible, and then selling to the highest bidder.
I Consider Flipping a Risky Business
In my mind flipping houses carries more financial risk and pressure than buying and renting, but that does not mean selling a property from time to time does not make sense. If you can cash out a property and use the proceeds to invest in a new property with a greater return, then yes by all means sell. My investing strategy is about taking the long view. I buy for cash flow and not short term gains.
Real Estate is NOT a Liquid Investment
Investing in real estate is different from investing in other asset classes like stocks and bonds because it is not liquid. In other words, real estate cannot be converted to cash on short notice. The need to cash out quickly could lead to selling at a price that wipes your projected profit or even your principle.
I Like a Bit More Control
Today, there are many more external forces that can affect housing in the short and medium term. In our hyper-connected financial, social, and 24 hour a day news world, a hiccough in another country can affect or delay the sale of your flip house. A federal government shutdown that drags on past a few days plays havoc with the local and national economies and is completely beyond our control. And of course, if financing is involved, every day on the market costs money.
I Have Enough to Worry About
People’s reactions to news may not be rational but we all consider either consciously or subconsciously how and to what degree an unexpected event will affect our jobs. From a buyer’s perspective, committing to a 30 year mortgage is a big deal, and harder to do if there is even a chance that your income could be in jeopardy. Yes, I may be overly cautious at this stage of my life, but this approach allows me to be less concerned about the short and medium term market value of my property.
There Is No ‘Right Way’
There are many ways to make money in real estate. Just because my risk tolerance is lower than yours does not mean my way is superior. I do however, want you to consider all of the possible ramifications of the path you choose.
What Are Your Investor Mindsets?
Are you interested in diving deeper in to your personal mindsets and motivations as a real estate investor? Set aside 15 minutes and complete the Making Real Estate Work Mindset Scorecard. You will get instant results and insights to your own personal view of the business you may not even be aware of. For more information about The ROOST Landlord Advantage™ property management system, visit us at www.ManageWithROOST.com.
As an added bonus, once you complete the scorecard you will receive a free book called Your Make Real Estate Work Mindset Scorecard – 8 Real Estate Investment Mindsets Growing or Slowing Your Business Right Now. I guarantee this easy to read pdf will give you a lot to think about.