For years we have all heard the stories of people making a fortune speculating in real estate. But what precisely is speculating? Is it just a fancy word for investing? Not quite. Speculating generally refers to the practice of flipping properties before they are even complete. Now, that being said; it also needs to be pointed out that speculating comes with a great deal of risk and only works at specific times in specific locations. The kind of locations where speculating works are areas that suddenly have a huge drawing power like trendy vacation spots, new ski resorts and new construction areas that are close to famous attractions.
Great examples of areas like this were Florida and Las Vegas in the early 2000's.
Now, speculating is really not for the average home buyer as the risk that is associated with it is remarkable. The problem with speculating is that once the attraction for a certain market wears out, someone will be left with a white elephant. In order to be successful in speculation, you need to be able to predict markets accurately so you know when to pack it in. Flipping homes will generally be much more accessible and successful for the aver gage investor. Flipping homes is really not dependent on the current market as a smart rehabber will be able to make the flip work at any time. There will always be homes that are selling for less that what they are valued at. With a little bit of work and time anyone can locate these properties; make some upgrades and fixes, and realize a nice profit. In looking at markets, a declining market will actually be beneficial to those looking for properties to flip. Areas that are hot usually are host to inflated property prices, making it much more difficult to find the kind of deals that are perfect for flipping.
