Flipping Real Estate
Outside Nigeria, flipping houses is one of the more popular tactics for making money in real estate, due largely to the numerous shows on cable TV that promote it. House flipping is the practice of buying a piece of real estate at a discounted price, improving it in some way, and then selling it for a financial gain. In reality, the flipping model is quite similar to the “buy low, sell high” model of most retail businesses.
The most popular type of property to flip is the single family home. Following a rule of thumb known as the 70% rule, an experienced house flipper will buy a home for 70% of its current value less any rehab costs. For example: Home A should be worth N1,000,000 if it were in good condition, but it needs N200,000 worth of work. A typical house flipper will purchase the home for N500,000 (N1,000,000 x 70% – N200,000) and seek to sell it for the full N1,000,000 when completed. This is simply a rule of thumb, and actual numbers must be verified by a qualified construction expert and adjusted to ensure a successful and profitable flip.
Flipping is not a “passive” activity, but instead is just like an active day job. When an investor stops flipping, they stop making money until they begin flipping again. Many investors choose to use flipping to fund their day-to-day bills, as well as provide financial support for other, more passive investments.