Flipping real estate, for all its appeal and fame in reality television shows, is best accessed by individuals as passive investors with a long term approach.  When approached from that perspective, the gains can be very compelling.

 There are ways to approach flipping properties so that the returns are not only much higher, but just as secure as traditionally defense investments, such as utility stocks.

Jerry Cohen, President and Founder of EquityBuild, a real estate investment firm, reports returns of 17% for properties that are flipped.  Cohen, who has been a principal in more than two thousand real estate transactions since 1984, selects these properties for the profit potential of each to be sold at a higher price after being fixed up and rehabbed.  That is a much, much better return, about twice as much as the high single digit returns projected for utility stocks by Dan Eggers, an analyst for Credit Suisse, in a recent article in Barron's by Andrew Bary, "Slow and Steady Wins the Race."

While the return in flipping properties exceeds the bullish projection for utility stocks by about 100%, there are ways to make it just as secure.  The first is to approach flipping properties as a passive investor with a long term approach.  Trying to flip a single property as an individual investor is very risky.  Investing with experienced professionals for the long in a wide variety of real estate is a far better way to gain from flipping properties.  That will be, by far, the most rewarding way to profit from flipping real estate for the individual investor.

Next is to only flip properties that have downside protection.  A major appeal of utility stocks is the steady dividend income that is paid out, at about an average rate of 3-4%.  Many buy utility stocks not for any major gains in the share price, but to receive a secure dividend payment.  To provide protection when flipping, only real estate that can be rented out to cover the mortgage should be selected.  This means avoid raw land deals.  That way if the property cannot be sold, it can be rented out to cover the expenses, providing a profitable monthly cash flow.  When the real estate market gets healthier, it can then be sold for a profit.

Deploying the funds from your retirement account to invest in flipping real estate provides even more security.  When you put a property in a retirement vehicle, such as an Individual Retirement Account (IRA), there can be no mortgage.  That ensures that there will be no worst case scenario of not being able to make the mortgage payment.  This allows for more flexibility in which properties can be flipped as mortgage payments will not factor in the equation of which to buy and sell.  In addition, when a property that is flipped is part of a retirement account, the profits are tax free.  That can bump the return from the investment higher by more than 30%.

The profits from flipping properties is a major contributor as to why investing in real estate has created about 90% of the world's millionaires over the last 200 years. Passive investing in flipping properties with a long term approach should prove to be the most rewarding for the individual.  It is definitely the most secure way to profit from flipping properties for individual investors as experienced professionals select only the most appealing properties.