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What is House Flipping?

Answer:
House flipping is a real estate venture in which

an investor buys a home for much less than its assessed value and makes enough renovations to sell the home for at least its assessed value, if not more. Either the house is in immediate need of expensive repairs or the seller is motivated by personal circumstances to accept a very low offer from a known house flipper.

The practice of house flipping has been around for a very long time, but many would-be investors became interested during the housing boom of the late 1990s and early 2000s. Professional house flippers even offered special videotaped courses and lectures on the finer points of house flipping for profit.

Indeed, many people did enjoy significant profit by investing several thousand dollars in new appliances, furnishings and structural repairs to homes in less-than-desirable locations and reselling them to more affluent home buyers. In this way, entire neighborhoods could be upgraded to middle or upper middle class status with minimal investment.

House flipping is a legal practice in the United States, but it can be very risky for the investor. The changes made to the distressed home must be deemed more than cosmetic to satisfy most building inspectors and appraisers. This is okay if the house only requires minor to moderate repairs, but a house which has serious structural damage can cost more than it is worth to bring up to code. This is why a potential house flipper needs to inspect the building personally or hire a trained inspector to conduct a thorough inspection before closing on the property.

Some critics of house flipping believe the practice is responsible for the gentrification of many working class neighborhoods. Gentrification entails wholesale renovation of a blighted area, often resulting in housing that most of its former citizens cannot afford. The result is a forced migration to even more blighted areas and the perpetuation of a downward spiral.

On the plus side, responsible house flipping can result in higher property values and higher property tax revenue for the city. As long as the house flipper makes more than cosmetic changes and finds qualified buyers, the practice is generally tolerated by city building departments and realtors.


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