A Real Estate Investment Group
Profits from flipping real estate come from either buying low and selling high (often in a rapidly rising market), or buying a house that needs repair and fixing it up before reselling it for a profit ("fix and flip").
Under the "fix and flip" scenario, an investor or flipper will purchase a house at price often deeply discounted from the house's market value. The discount may be due to the house's condition (e.g., the house needs major renovations and/or repairs which the owner either does not want, or cannot afford, to do) or the owner(s) needing to sell a house quickly (e.g., relocation, divorce, pending foreclosure). The investor will then perform necessary renovations and repairs, and attempt to make a profit by selling the house quickly at a higher price (closer to or maybe a bit above market value). The "fix and flip" scenario is profitable to investors because the average home buyer lacks the time and funds to repair and update the house, so they seek out a move-in ready home instead. Also, most traditional mortgage lenders who give financing to regular home buyers, require the home to be in move-in condition with no significant repairs. This means most regular home buyers cannot get traditional financing on a home that needs repairs.