History of Real Estate Investing
Although the term "flipping houses" is relatively new, the practice of buying and reselling houses, either as an investment or as a quick money-making scheme, has been around for a long time. In fact, using real estate as an investment tool stretches back to the birth of the nation and before. Even in pre-colonial England, property ownership was a symbol of wealth and, before property taxes were established, one of the main ways for the wealthy to ensure their assets.
In more recent times, investing in real estate has been seen as a way to profit during periods of low interest rates. Much of this investment once was in the hands of wealthy wheeler-dealers like Donald Trump who could put together large amounts of money for investing in large commercial projects. More and more these days, smaller scale investments have expanded to include more than the big-money moguls.
One of the moves that was a precursor to the house flipping phenomenon was the enactment of the Federal Real Estate Investment Trust (REIT) legislation in 1960. This act made it easier for large investors to pool resources for major, mostly commercial, real estate projects. The legislation has been modified over the years and has led to a much larger real estate industry; and any industry that expands is always looking for new markets. As a result, today there is a much greater pool of talent out there for those looking to pursue real estate investments.
Another factor that has led to the house flipping movement was the economic recession of the 1980s. This had the double effect of holding down stock market earnings and increasing the number of house foreclosures. Just about everyone has seen commercials and late-night "infomercials" about how to buy houses "with no money down" and get rich quick. Sellers of these package plans promised big profits with little risk by buying and selling houses.
Another factor driving the popularity of house flipping is the rise in popularity of renovating old houses. Television programs such as "This Old House" from the 1980s have given rise to seemingly dozens of such shows on cable television today. This, coupled with the transformation of hardware stores into "home improvement centers," has put the information and expertise into the hands of everyone, not just contractors and carpenters.
These days, there are people who make their living by buying a "fixer upper," living there for a few months while they renovate the property, then selling it for a nice profit and using the money to buy another house.