Make money when you buy
Watching television shows about flipping real estate might give the impression that it's all about the remodel, but that's not the best strategy, according to Bruce Ailion, a Re/Max agent in Atlanta.
"I never like to purchase anything I couldn't sell tomorrow for a profit," he says. "Most inexperienced flippers think there are huge profits in flipping. But actually the margins are not as great as the television gurus would have you believe."
By sticking to properties that are undervalued, flippers build themselves a small cushion, which can be critical because surprises pop up when you rehab a home.
"When you leave 10 percent or more on the table, or overpay market by 5 or 10 percent, those errors drop to the bottom line, and what looked like a profit quickly becomes a loss," Ailion says.
In the past, it was relatively easy to make money when you purchased a home because prices were rising so rapidly. But these days, that can be a challenge, Ailion says, adding that a market with more realistic prices means that flippers need to look harder for the right houses and be disciplined not to overpay.