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House flipping making its return?

Remember when house flipping was all the rage? Investors would purchase lower-priced homes in hot neighborhoods, places like Chicago’s Lincoln Park, Lincoln Square or Lakeview, fix them up and sell them for big profits.

Flipping disappeared during the housing crisis. But the practice is actually becoming popular again, thanks to the affordability of single-family homes and condominiums today.

Consider a recent story by Brad Tuttle for Time Magazine. Tuttle writes that flipping homes has become a boom business again. He quotes numbers from online foreclosure site RealtyTrac saying that the number of house flips rose 25 percent during the first half of 2012 when compared to the first six months of 2011.

And these house flips are bringnig in some serious dollars. According to RealtyTrac, the gross profit on each flipped house averaged $29,342.

As Tuttle rightly points out, gross profit isn’t the important number. Gross profit doesn’t take into account the costs of rehabbing a property or the payments flippers make to home inspectors and lawyers. Flippers care about net profits — the money that they actually make — and there are no stats measuring that.

Still, it’s not surprising that flipping is on the rebound. Housing prices, even in attractive real estate markets like Chicago, are down. And the key to successful flipping is to buy low and sell higher. In other words, flippers make their money at the time of purchase. If they spend too much for a home, they’ll never make the net profits they want.

Are you interested in joining the growing ranks of flippers? Make sure to work with a REALTOR(R) who is knowledgeable about your area. This professional will make sure that you don’t overpay on your investment.

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