In a recent article in USA Today by Matt Krantz, John Waggoner, and Rodney Brooks, investors looking to make double digit returns were warned to avoid "...some skeevy house-flipping scheme." flipping real estate For any investor, and particularly those looking to profit from real estate, there is no better advice.

 In what was a very useful article by the three financial journalists, "5 tips to help get your financial house in order," that was probably the most helpful bit of advice.  More than likely that was why it was listed as part in the first tip.

What was not part of the USA Today piece was how to avoid a "skeevy house-flipping scheme."  

There is certainly no secret: just common sense, along with research and due diligence, which should be part of an investing plan.  First, apply the most demanding challenge of all: that of the test of time.  Look for a flipper who has been in business for years, preferably decades.  That will not only demonstrate their acumen in real estate investing, but also their ability to prosper in all market conditions.

As one example, Jerry Cohen, who has been investing in real estate since 1984, Jerry is also the President and Founder of EquityBuild, a real estate investment firm.  Over that period that includes recessions, asset bubbles, wars, double digit investment rates, and even the impeachment of a president, Cohen has posted a documented 17% return for the buying and selling of properties in flipping transaction.  Overall, Cohen has been a principal in more than two thousand real estate transactions of all types.

It is also comforting when the flipper stands behind their work with a financing package.  That demonstrates that they are not just going to take your money and move on to the next deal.  EquityBuild Finance, the funding arm of EquityBuild, provides mortgages to help investors buy the properties it finds, fixes up, rents out, and then manages as a turnkey property.  For a investor looking to profit from real estate, a turnkey property is an excellent way to begin.

Another basic common sense approach that utilizes some research and due diligence, but more overall awareness, is where the property to be flipped is located.  Cohen is busy in Chicago, where the real estate market is very strong.  Others are looking to flip properties in Cleveland and Detroit, where the city governments are razing thousands of vacant properties.  

Click here for a Youtube video on a PBS story on vacant houses being razed in Cleveland.

Click here for a Youtube video on an Associated Press story about 3000 vacant houses being razed in Detroit.

Common sense tells you that if a real estate market is rebounding like in Chicago, the houses will be fixed up and restored, as Cohen is doing.  By contrast, by the thousands vacant houses are being demolished and leveled in Cleveland, Detroit and other cities in downward real estate spiral.

For downside protection, only buy a house to flip if it can be rented to cover the monthly expenses.  That way if it cannot be sold, it can be rented without being a cash flow burden.  That is another reason buying turnkey rental properties is so compelling for investors!

Flipping properties for a profit is a very useful component of an overall strategy to gain from real estate.  There should also be a place for passive investing with a long term approach, as that is very rewarding, too.  But there is much to be avoided in flipping real estate, as it is a part of real estate investing that takes a great deal of skill and specific knowledge.  Starting with the test of time with due diligence and research is a good way to begin.  But there are many other aspects to master before an investor can post the profitable track record for so long as has a successful flipper such as Cohen!