Flipping Houses: 3 Ways to Make Money Investing in Real Estate

Tip! Purchase the house at the lowest possible cash down-payment and get the seller to carry back a second mortgage or deed of trust for the property. Your ideal purchase of investment real estate is always to get the very best price and terms.

The term flipping seems to be everywhere nowadays, including in the titles of a number of television shows that have attracted loyal followings. That means lots of people are interested in buying houses and reselling them at a profit. That's the good news. The bad news is that there's considerably more competition for fixer-upper homes than there was before the concept became so popular among television viewers.

But that doesn't mean there isn't still a significant amount of money to be made buying and reselling homes. Here are three tried-and-true ways to succeed at becoming a successful home flipper.

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The first one is the most popular, and the concept is quite simple (at least on the surface): you find a home that's in need of repair or upgrading, you go in and do whatever work is necessary, and then you put the home on the retail market. Depending upon where you live, how hot your market is, and how good of a bargain hunter you are, you can sometimes make $25,000 (or much more) on a single transaction.

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There are some dangers involved in that strategy, of course, including paying too much for the property in the first place and then in underestimating how much the repairs or upgrades will cost. In fact, the latter situation provides one of the most common points of tension in the various television shows devoted to flipping houses, so it's best to have a solid knowledge of home prices and repair costs before you attempt any flipping method.

A second method that works well is to buy a rundown house, do whatever it takes to bring the property up to standard, and then to rent the home on a lease-option basis. There are some advantages to this method. First, you can get a potential buyer into your home without having to pay a real estate fee. Second, you'll be getting a renter who genuinely wants to buy the home at the end of the lease, so they'll take better care of the property. Finally, there may be some tax advantages to you if it takes more than a year for the lease option period to expire. Check with your tax advisor for more details on that.

Tip! Foreclosures - while highly lucrative and one of the top income producing methods of real estate investing, the time and knowledge required to actively pursue such deals is becoming more difficult all the time.

A third method requires a greater knowledge of home prices and repair/upgrade costs, but it can make you a considerable amount of money without having to do any repairs yourself. That method involves finding properties and reselling them to other investors on an as-is basis. You won't make as much money per transaction, since you'll have to sell at a below-market price to the next investor, but depending upon your market and how good you are at finding bargains, you can flip those properties faster, since you won't be doing any repairs or upgrades before you turn around and resell them.

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Fixing and reselling homes has been an investment strategy for centuries, and will continue to be a popular investment option as long as folks still live in houses. You can get your piece of that pie if you shop hard, estimate carefully, and know your market!

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Flipping Houses: 3 Ways to Make Money Investing in Real Estate