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Flipping properties, which involves buying a piece of real estate and then reselling it at a profit, has long been one of the most tried-and-true ways to make money as an investor. However, is there an ideal length of time that you should hold on to a property before putting it back on the market? The answer is a qualified "it depends."
If you're buying a brand new house, you may actually discover that the builder has a clause in the contract that says you MUST hang on to the home for a specific amount of time, often one year. But with most pre-owned homes, there isn't such a clause, and you're generally free to sell the home as quickly as you can find a buyer and make a profit.
However, the rule of thumb for flipping houses seems to be three to six months, especially if you're planning to make repairs or remodel a home for profit. According to specialists, selling before or after that time will normally result in less than a maximum return on your investment.
A flipper-type investor wants to get in, make whatever repairs may be necessary, and then get out as quickly as possible, with the goal of making money in the process. In a recent study of three metropolitan areas of the United States, it appears that investors who flipped properties averaged a 15 percent return on their initial investment. However, investors who sold their properties between three and six months often were able to realize profits of as high as a 50 - 100 percent annualized appreciation rate. That is a significant increase, and brings up the question as to why the figures were so much higher.
The key seems to be that investors who can find under priced properties in relatively brisk markets are able to make the necessary changes in the houses and then get what amounts to an immediate sale, which gave them a premium price that was some 20 - 40 percent ahead of the market in their area. In other words, they were working within markets that were booming, and were able to take advantage of that situation to reap greater profits.
The bottom line for you as an investor? Choose your area of investment carefully. Know your market, inside and out, negotiate hard, and then resell the property within three to six months if you're hoping to make the maximum profit on your investment.
Copyright © 2006 Jeanette J. Fisher
Article Source: http://EzineArticles.com/?expert=Jeanette_Joy_Fisher
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