Investment Strategy #2: Fix and Flips

Maybe you've watched the shows on TV about flipping properties or seen ads that say "We buy ugly houses". These investors will buy a house that most regular home buyers won't touch because the house has taken some abuse. Investors will then fix it up and sell it quickly for a profit.

One of our investors met a man who had an odd hobby: this man enjoyed buying large kitchen knives and throwing them across his living room into the opposite wall. Having knives embedded in the living room wall was only one of many minor problems with the house, so when this man came to a point where he had to sell his house or go bankrupt he found that normal home buyers were not very interested. The property was lacking a certain "visual appeal", and since he didn't have the money to fix it up his only option was to sell it to an investor who would.

Things like fixing holes in drywall, replacing carpet, and applying a fresh coat of paint to a house will cost a few hundred dollars but will increase the value of a home by several thousand. Investors who fix and flip houses will find a $100K house with problems, buy it for $80K, put $10K in to fix it up, and sell it for $110K, pocketing a good $20,000.

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