Read the following text, answer the questions and make the resume.
1. Explain what does the expression flipping real investment mean?
2. What are plusses and minuses of flipping?
3. Why do people move into flipping?
4. Must you have some knowledge or skills if you go into flipping?
Strictly speaking flipping real estate is not investing. However it is a very powerful strategy that you can use with 'Buy and Hold' strategy to generate huge amount of cash flow to fund your investment properties.
Flipping real estate means to buy a property with the intention of selling it within shortest possible time frame to make an immediate profit.
If you are anything like millions of property investors you have probably caught the 'flipping bug' through countless TV shows that boast about serious profits that can be made by flipping properties then you must be cautioned. It is very true that serious money can be made when one goes about flipping real estate the correct way. However, serious money can also be much more easily lost when a property flip goes wrong. If you are hoping to find your way to fortune through real estate flipping you need to educate yourself on a few flip basics.
You buy property for long term capital gain. Properties can provide passive income for your retirement years. You can also have the satisfaction of passing the property wealth down to your future generations.
Initially most people do not have money to pay the deposit to buy their first investment property. You may consider flipping real estate a good strategy to generate cash flow initially and then start holding properties for capital gain.
The basic advantage of flipping real estate is that you get cash immediately rather than later. The attraction of getting a paycheck right away rather than wait for years can be very compelling. Flipping properties takes the risk of market fluctuations out of the equation. Markets can rise or fall but if you have bought the property correctly and sold it within a very short period of time you will make a profit irrespective of the market conditions.
Flipping real estate is also suitable for people who don’t like to deal with tenants and the headaches that come with investment properties. There are some people who look to create a secondary income by flipping properties. There are others who make flipping their full-time business and quit their jobs.
Flipping real estate on the face of it looks simple but the execution can be quite complicated. The main skills that you will need are to find areas where to buy the properties to flip. How to get the values right and buy below market valuation? Then there is the question of what improvements to make for quick profits? You will also need to organize your finances and find the right trades people to execute the repairs? Budgeting is very important or you may spend more money than planned. This can dilute your profits or result in a loss. Last but not the least you should know how to sell your property with minimum cost and within the shortest time frame so that market conditions don't change. You must also have an exit strategy in case you are not able to sell the property for a profit as planned.
You can use various strategies when flipping properties.
The best time to flip properties is when the market is on the rise. In a boom period your mistakes will get covered up because of increase in property prices. During a slow down period properties can sit for ages before they are sold. If the prices slide during this period your profits can get diluted or you may land up in making a loss.
When the price movement is downward the best places to buy a property to flip is through foreclosure or short sale. The aim should be to buy a property 30% below market value and sell it 10% below market valuation to make a quick sale.
In a booming market when the prices are moving upwards it will be difficult to buy properties below value as there are too many buyers. You have to then aim to buy properties around 10% below value and carry out value addition through renovations. If you provide value to the buyer you will succeed in making a profit.
Flipping high value real estate is more profitable because wealthy people will pay more money for quality properties. These high end projects however need far greater skills and financial muscle to execute. They also carry a very high level risk and must be avoided by investors who are starting out.
A 'flipper investor' acts both as a buying and selling agent. You can make good profits if you gain skills in these two activities. If you know how to buy correctly and sell at a profit you can make a handsome profit by flipping. Your profits will increase substantially if you also acquire skills of adding value to the property through appropriate renovations.
As a flipper you don't need a real estate license to practice. The advantages for you are that you will flexible hours of work and you don't have to drive a Mercedes like real estate agents to impress a client.
Ex.1. Read and translate the following sentences from the text. Mind your grammar!
1. Strictly speaking flipping real estate is not investing.
2. Flipping real estate means to buy a property with the intention of selling it within shortest possible time frame to makean immediate profit.
3. It is very truethat serious money can be made whenone goes about flipping real estate the correct way.
4. If you are hoping to find your way to fortune through real estate flipping you need to educate yourself on a few flip basics.
5. Initially most people do not have money to pay the deposit to buy their first investment property.
6. Markets can rise or fall but if you have bought the property correctly and sold it within a very short period of time you will make a profit irrespective of the market conditions.
7. Flipping real estateis also suitable for people who don’t like to deal with tenants and the headaches thatcome with investment properties
8. The main skills that you will need are to find areas where to buy the properties to flip.
9. During a slow down period properties can sit for ages before they are sold.
10. When the price movement is downward the best places to buya property to flip is through foreclosure or short sale.
11. The aim should be to buya property 30% below market value and sell it 10% below market valuation to make a quick sale.
12. In a booming market when the prices are moving upwards it will be difficult to buy properties below value as there are too many buyers.
13. These projects carry a very high level risk and must be avoided by investors who are starting out.
14. A 'flipper investor' acts both as abuying and selling agent.
15. As a flipper you don't need a real estate license to practice.
III.HOME READING
Text 1. TYPES OF FLIPPERS
Read and translate the following text and Answer the questions to the text:
1. Who is the Scout? (the Dealer? The Reailer?)
2. If you have a chance to go into flipping, who will you be: the Scout, the Dealer, the Retailer and why? Explain your choice.
There are basically three different types of real estate flippers. This classification is based on level of skill required:
• The Scout • The Dealer • The Retailer
The Scout
The Scout is often referred as the "bird dog" or information gatherer. A scout finds potential flipping deals and sells the information to investors who have the money and skills to execute the deal. When you are new to the game you can get started as a Scout for flipper investors. You not only make money but also learn from how the flipper investor executes the deal. As a 'bird dog' you find a property for sale and then pass on this information for a fee. Your fee will depend on the profit potential and price of the property. As a Scout you can make anywhere from $500 - $1000 each time your information leads to purchase of a property.
The Dealer
Like the Scout a Dealer also finds flipping deals for other investors. The only difference is that after he locates a bargain property he signs a purchase agreement with the owner in his name with the right to assign the contract. By doing so he has control over the property and can flip the contract at a much higher profit to the highest bidder. The Dealer is required to come up with the earnest money which increases his exposure. He also needs to have large contact data base of 'flipping investors' to on sell the contract.
Dealer who works full time can make over $10,000 per month without ever dealing with a tenant or fixing a property.
The Retailer
The Retailer is the 'Flipper Investor' who buys properties from a Scout or a Dealer. He buys the property to carry out improvements and to sell it at a profit to an owner-occupier. Retailer makes the most profits but also carries the most risk on each deal because he has to upfront the money. Unlike the Scout or Dealer who make their money quickly it can take the Retailer months to realize his profit.
Flipping real estate is very important aspect of becoming a successful property investor. Please read through numerous articles on this website explaining various facets of flipping that will provide you with certain level of confidence before you decide to use this strategy to your advantage.
Read the text and make the resume:
Text 2. REAL ESTATE INVESTMENT ADVISERS – TEAM THAT DEFINES YOUR SUCCESS
The quality of real estate investment advisers that you choose to work with will define your success. The people who are most likely to advise you on property matters are real estate agents, valuers, lawyers, and accountants. You may also like to consult your bank manager, mortgage broker, property manager, trades people, builder and architect.
These real estate investment advisers will form your core team that will define your success. Inputs from them will affect the quality of decision you make. Therefore it is important for you to surround yourself with the best possible team.
Always remember that you approach your team for advice only. You should never let them make decisions for you. Remember that each member of your team is an independent contractor with his own agenda. For instance a lawyer will normally guide you towards caution as he does not wish his advice to have any adverse impact at a later date. An accountant will only look at the numbers and not the property and its future potential. A real estate agent may highlight only the positives and not the downside of the property.
Ask questions, listen to everybody but keep your council. Final decision is always your responsibility. You will need to weigh the pros and cons, take into account risks and returns before making a final decision.
Real estate investment advisers that you select should invariably be property investors themselves. If they are property investors their quality of advice will be much superior because they will have a much deeper insight.
When you are starting out don't get intimidated by the professionals you meet specially the ones who wear suits and sit in flashy offices. They may confuse you with their jargon and knowledge and may make you feel inadequate. It is important to remember that these real estate investment advisers are there to do a job for you for which you are paying them. If you don't understand something ask them to explain it to you in layman terms.
Beware of people who call themselves experts. There are bankers who dish out millions of dollars in property loans but don't own a single investment property. Same is true for some smooth talking real estate agents, accountants and solicitors who will give you advise without having any worth while investments in their portfolio.
If you wish to seek advice go to people who have been there before you. Advice from such people is priceless and will save you hundreds and thousands of dollars.
Ask questions and do some background checks before employing services of a professional as a member of your team.
In many ways you will only be as good as your team of real estate investment advisors. Do not hesitate to pay a few extra dollars to hire the services of the best professional. Your investment in your team will pay you hundred times over.
