Q:

How do you flip houses to make money?

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Quick Answer

Developing home repair expertise, becoming an expert on target neighborhoods, taking the time to make wise decisions, and amassing enough capital to make the sales of the home bring in profits are four steps to flipping a home profitably, notes Investopedia. Novices end up stuck with the unprofitable deals.

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Full Answer

Hiring contractors to take care of renovations eats up the majority of profits in many "flip" deals, in which an investor buys a house at a low price and hopes to sell it at the top of the market. To justify that increase in the sale price, it's often necessary to put down new carpet, re-roof the house and install enhanced sinks and other fixtures. Having the expertise to find these at cut-rate supply shops and install them saves thousands of dollars, adding those to the bottom line, as stated by Investopedia.

People who end up losing money in the "flipping" game often entered the process without enough capital. Lots of marketing goes into low- or no-money-down financing, but those claims often evaporate before the paperwork is prepared. While the investor holds on to the house, he has to pay utilities and taxes as well as interest on any financing. After the sale of the house, capital gains taxes eat away at profits as well. Rookies who snap up cheap houses in markets that do not sustain the sale prices that they want end up losing a fortune in real estate, according to Investopedia.

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