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Property Value: Active and Passive Appreciation.
When you engage in a house flip deal, there is also the chance that, for various reasons, you need to hold the property for a longer period of time. This can happen because the process of renovation of the house is taking a long time, or because you have trouble finding a buyer interested in the respective property.
This is why, before engaging in a house flip deal you should prepare for this possibility, and set up a “plan B”, in case your initial strategy doesn’t work out. In other situations, you might want to profit from a rising market, and you actually plan to buy a property, keeping it for a certain period and then sell it on a higher price to make a profit.
In both cases, the property value needs to appreciate, either actively or passively, for you to get a profit from the house flip. Appreciation is therefore the increase in value of a property over a period of time.
So, appreciation can come from two sources:
A passive source and an active source.
As the name suggests it is not dependent on your actions, and it occurs when the market is rising. You need to study the price trends of the market you are dealing with. Look up on the web for statistics about the evolution of the prices of properties in the state and city where the house flip property is located.
Remember that some states are better performers than others, and in a state, some cities will experience a price growth while other will stagnate or even decline. Passive appreciation can occur even in a slow market, you only need to find the right niche or the right area.
When you are not satisfied with the level of growth generated through passive appreciation, or when the market value is actually declining there are some actions that you can take in order to make the value of your property to actually appreciate.
Active appreciation is not simply a fancy name for repairs, although renovation is a good measure that will help with value appreciation and is essential for a successful house flip. Active appreciation can also include:
The list can go on. Active appreciation is only a matter of you having the flair to make the right choices for the respective house. Always do your homework when attempting a house flip, and, using the gathered information, try to transform ideas into actions which will steadily increase the perceived value of your property