Flipping, Speculation and Investing - Spring 2014

All three of the above real estate terms share a common goal of maximizing profits but the methodology is vastly different.  Flippers are essentially gamblers buying real estate with the hope of a quick profit, with little or no market research and often using other people’s money.  All flipping requires is the gut of a gambler.  There are professional flippers as there are professional gamblers; but in the end there are few standing with a profit.  Speculating is viewed somewhat less pejoratively than flipping and differs in that often there is market study or indication other than a gut feeling that a property is likely to increase in value.  The speculator buys anticipating some change to the market.  He may know of some area of improvement, new road, shopping mall, rezoning etc. and speculate that the property values in that particular area will increase. Investing can be short term but is more often associated with holding the asset long term.  Fundamental in real estate investing is recognizing that real estate is often not a liquid investment and timing of selling the asset determines maximum profit.  Investing is often more analytical and less emotional, however, most really good real estate investors do listen to their intuition while following solid market fundamentals.  The investor respects and recognizes the market, values sound research and understands that the passage of time does not change value other forces do.  Which one are you?