Investment

People usually make investments in order to see a return on their initial money. The best known type of investment is the stock market. The most secure, and the one with the least return, is a bank savings account. Generally, the amount of potential return is directly proportional to the risk involved. This also can be said to be true for those involved in house flipping.

As with any other use of money, people who flip houses are expecting to make a profit. Since house flipping involves a quick turnaround of buying and selling, it is hoped that the profit also will be a quick one. The amount of risk, however, is an open question.

Alternative Stock

The practice of buying real estate for a quick resale first started hitting the airwaves during the 1980s during a prolonged economic recession. The advent of the late-night "infomercial" was due in part to a number of so-called "self-made millionaires" who bought half-hour chunks of time during which they pitched their "get rich quick" schemes for buying and selling houses. It is a sales ploy that remains popular to this day.

At the time, stock market returns were not what many would have liked. The 1980s also saw the rise of baseball and other sports trading cards as investments, not to mention comic books. Purchasing these "collectibles" was termed the "new stock market." House flipping also was one of these new investment strategies. Post-1980s, during the rise of the internet as a means of communication and conducting everyday business, people have taken to online trading and auction sites such as eBay as ways to make money in a digital environment. However, prior to this, house flipping remained one of the most appealing ways to invest large sums of money and gain large returns during the age before the world wide web.

Profit

While many were lured into the house flipping market with the promise of big returns, it has remained popular due to a tight real estate market and unusually high demand. In the decades since the 80s, stocks first rose then dropped off again, but house flipping has remained a popular practice. It has become common knowledge that real estate is a fixed asset that retains value even when the worth of other investments fluctuate.

By the beginning of the 21st century, interest rates for home loans had hit record lows and generally remained low. While this cut into the profit to be made on house flipping it kept a steady flow of customers available. It also meant that there was money readily available for those who wanted to buy a property, renovate it so its value would increase, and then resell it.


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