The Best Flipping Opportunities in 2012

The housing market can sometimes feel like a roller coaster ride of ups and downs, and sometimes the difference between finding a good property and a great property to “flip” can mean the difference between a huge profit, and a huge nightmare. Is there such a thing as the perfect property? Well, that depends entirely on your situation – but there are some good guidelines backed up by hard numbers that can help you make your decision when purchasing your new project.

1.) Follow the Trends
The trends of your area will vary, so it’s impossible to give the perfect answer for everyone. What works for you in San Francisco, might not work for another investor in Poughkeepsie, but generally speaking, every city has a standard inventory of single family homes which are in high demand, and tend to maintain their resale value. When in doubt, and especially if you’re new to the industry, stick to what works for your area. Get your feet wet with a standard three bedroom, two bathroom single family home before moving on to anything more challenging. Remember that the bigger the property, the bigger the potential for loss.

2.) Social Trends Override Market Analytics
As we’ve said before (and will say again) every area is different. But it’s important to observe your market and take a keen interest, not just in the housing trends, but in the social trends. Social and emotional trends will directly influence housing data. For example, in areas where divorce is high, the demand for smaller housing will tend to increase (because two people who are now separated are making half or less of what they used to – not including the potential repayment of child support, etc.) So, those would be areas where it’s good to invest in smaller houses or condos.

So, overall, keep everything in mind – from graduation rates, to new companies moving into the area (creating jobs, and new employees needing housing) to divorce rates and the overall economic picture of your local market.

3.) Luxury Hotspots: Always Hot
If you can afford the investment of a potential luxury hotspot, these are always good investments. They’re called hotspots for a reason – they’re in demand. Luxury condos are a big market with celebrities, and vacation home buyers (from private owners to corporate vacation villas) so keep your eyes open for potential luxury avenues. You should also remember, if you’re considering investing in a luxury space of any kind, that you will be upping your investments in the property from the start – luxury entails higher end fixtures, designs, and upgrades to be competitive with the area you’re buying in. This always leaves the door open for a bigger financial headache, and is usually better attempted by investors who have both the capital to back such an endeavor, and the know how to get it done correctly, and on schedule.

4.) Rentals are Hot!
Buy and Hold investors are looking for properties with good cash flow, and while you may not necessarily want to take on a buy-and-hold yourself, you can certainly make an admirable profit by flipping and selling to them. Flipping to turn a property into a rental (income property) is all about understanding your market (which leads back to the second point we made, about understanding the emotional and social trends in your area.) Most investors are seeking out single family homes with a promising cash flow – this means modernized homes in budding areas – but wont turn down a multifamily unit that can produce more income in the same period of time.

Ultimately, the best house for you is the best house for you. Only you can decide what is the perfect investment for your situation, but we recommend taking a close look at what’s selling in your area and be aware of the social, emotional, and cultural points that may affect your buyers. Your buyers are ultimately the key to a good sale, so never underestimate the importance of understanding your online and real life social network when making a decision to purchase a new project.