The Genesis of a Real Estate Flipper by D. Sidney Potter

My name is D. Sidney Potter, and I flip houses. I started in 2002 on a whim with the expectation that I would buy a home and live in it for myself. Inadvertently this home turned out to be one of my first prospects. On this very first home I bought, I waited passively for about three to four months for the home to be completed. After a while, I noticed a funny little thing, and that was that the price started going up phase after phase, by small increments, in the $6,000 to $8,000 range. After the property was completely built, some seven to eight months later, I came to the conclusion that moving to this new home of mine out in Riverside, California, may not be such a profitable idea. In a split decision, I put the home on the market for $425,000 and sold it two months later for $415,000.

Amazingly, out of the gate I grossed $101,000 on my first home and I can tell you that it doesn't always work out this way. You don't always make $100,000 on a flip. And I can tell you, admittedly so, that I got lucky on this one. I hope to help those that have an interest in real estate investing- and more specifically new tract home flipping- in a reduced-risk environment that is both enjoyable, profitable, and reasonably achievable.

More particularly, the objective of this article is to provide a road map and edification for those who wish to invest in real estate, with an emphasis on new tract housing, for the sole purpose of earning a sizable profit upon its completion.

Often in the media, guys like me are referred to as flippers or speculators. Given the critique by the media, you'd think we were a real estate monster of some sort or perhaps the Gordon Gekko of real estate buying! The crux of flipping new tract housing is that the investor simply buys at a low price before the home is actually built. Notwithstanding the actual product type, the home is usually just an empty dirt lot in a subdivision. Normally, it might even be a concrete slab or just in the framing stages, but bottom line, it's a home that hasn't been completed- which makes it ripe for opportunity. The objective, when the home is completed-which is usually several months later-is to immediately resell the home for a substantial profit. This is flip methodology in its simplest articulation.

Although in 2011, and given the change in the market place, a flip today might be better characterized as an" intermediate flip", given the hold strategy required to reap the appreciation. What occurs from cradle to grave, A through Z, start to finish, nuts to bolts is what this article encompasses. It's how to buy a new tract home, hold on to it through its buildup stage and rapidly resell it after having bought it from the developer. During this time of incubation, what I call "flip candidates," given that they haven't fully matured and marinated, are not yet a transferable currency. As a result, they're still just flip candidates, until they're actually bought and closed from the developer. Because until that time, and no matter how much they may have gone up in value during the build-out time, nothing means nothing until you actually own the property yourself.

Having come from a real estate brokerage background where I previously sold shopping centers for five years with two major national brokerage firms in Los Angeles, and combined with my experience as a mortgage operations consultant, where I worked at different bank client sites across the country, which consisted of the evaluation and underwriting of mortgage notes in multimillion-dollar portfolios, I was uniquely qualified-for better or worse-to better understand the acquisition and disposition of investment product and the minutiae of underwriting guidelines that play a very large part in determining whether there's a profit to be made, or will be made in new tract home investing.

You the reader may find that buying real estate, even though you may have the allocated resources, is just not for you. And if that's the case, that's okay. But by reading this article and perusing other real estate books before and after it, you are at least making the well-considered and deliberative decision making that is required when allowing for such a momentous undertaking-which is the buying and selling of real estate in rapid succession.