Is Flipping Property Is Flipping Property Is Flipping Property Good for Your Wealth?Good for Your Wealth?Good for Your Wealth?

by Kathy Fettke, CEO of the Real Wealth Network

strategy

TV shows make fl ipping houses look easy, and bootcamps

make it seem extremely profi table every time. But in reality, new inves-tors often get burned on their fi rst few deals.

Everyone wants to make a quick buck, and in theory, fl ipping could be a way to do that. But please heed this warn-ing: Flipping is not for everyone!

Here are some tips to help you decide if it’s for you.

The Real Costs of Flipping PropertyThere are many hidden costs that new investors fail to calculate on the outset:• The cost of funds borrowed to purchase and/or renovate the property• The cost to sell, including agent fees and closing costs — estimate 10%• Holding costs, including on-going prop-erty taxes, interest charges, and insurance• Cost overruns — always allow a 10% cushion for the unexpected• Sales price variations — allow 10% less than what you’re expecting• Estimated profi t — 10% at a minimum (and if this is all you’re expecting, there are much lower risk investments out there!)• Short-term capital gains taxes — poten-tially 35% of your profi t. Always talk to your CPA before making any investment.

As you can see, after you calculate all repair costs, you’ll still need to be able to acquire the property for less than 60% of current market value.

Is it possible? Yes. Is it easy? No.

Buy & Sell VS Buy & Hold At Real Wealth Network, we advocate

buy & hold investing for the following reasons:

• Flipping requires hands-on involvement and most working people don’t have the time.• Successful fl ipping requires that you only invest where you physically live. A buy & hold investor can invest anywhere, have many investments working at the same time, and still make money doing other things.• A cash fl ow rental property can yield over 10% return after all expenses, without the risk of rehabbing and trying to sell at the right time.• Rental income is much more favorably taxed, and capital gains can be avoided upon sale if a replacement property is purchased according to IRS 1031 Exchange Rules.• Growth over time, for both rental income and capital growth, works the same as compound interest; it’s one of the most powerful tools in an investor’s arsenal.

Thirty years ago, one would

have had to put down $13,000 to buy real estate. Today that property would be completely paid off, and would have more than tripled in value. What’s more: you’d be earning at least $13,000 rental income per year! The same power of multi-plied growth is available today simply because prices are so low.

Real estate bought today could very well be worth more than three times its value 20 to 30

years from now. There is no other investment that delivers cash fl ow and capital growth like long-term real estate investments do.

Flipping is a job. Buying and holding property is an investment.

Kathy Fettke is the founder and CEO of Real Wealth Network “The Real

Estate Investors Resource.” Members have access to free

education, resources, and referrals to turn-key rent-

al properties around the United States. Real Wealth Network

has over 8,000 members, so the shear power of numbers al-lows the group to acquire properties at huge discounts.

Membership is free. Kathy is also

host of The Real Wealth Show on KABC

Los Angeles and on iTunes and is a regularly interviewed guest ex-pert on ABC, CNBC, CBS Market Watch and NPR.