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Posted: 6:00 a.m. Friday, March 8, 2013

House flipping makes a comeback



By Clark Howard


One of the most egregious practices that fueled the housing meltdown -- flipping houses -- is roaring back in a number of cities around the country.

You remember flipping, right? It entails buying a home that is so sad no one else is interested in it, typically from the bank, and then rehabbing it with your own sweat equity or hired help. In many cases, people are buying these houses for cash because the prices are so low.

The Washington Post reports flips are up 25% just over the last year. Some of the cities where this is going on in great numbers are Phoenix, Atlanta, Miami, parts of eastern Los Angeles and of course Las Vegas.

In some cases, the average profit a flipper can realize after buying, rehabbing, and selling is around $30,000 per property. You have people in their 20s flipping four properties a year and ending up with $100,000 in income.

If you want to flip, you have to learn the game, start small, and maybe do it with a partner. You've got to know the market. You can't come in as out-of-towner and expect to make money.

My associate producer Joel is seeing a lot of this going on around him in his 'urban pioneer' neighborhood. He bought a property for one third its last price and has a monthly mortgage of $582 (including taxes and insurance) on a 15-year loan.

All around him, speculators and flippers are buying all the sad properties (for cash) in his neighborhood that was almost given up for dead. Now the neighborhood is roaring back with all the rehabbing going on.

This is part of the process of healing the housing market in the U.S.

Don't hate the flippers. They put their money and labor at risk and help accelerate the housing recovery in the U.S.