Comments on: Is Flipping Houses Investing or Speculating?

By: HUD homes: Save big money by buying foreclosures - Smart Spending

HUD homes: Save big money by buying foreclosures - Smart Spending — Wed, 16 Jul 2008 11:20:20 +0000

[...] Is flipping houses investing or speculating? [...]

By: DR

DR — Fri, 03 Aug 2007 01:17:20 +0000

Engineer, why do believe #2 is not a flip? The plan is to rehab and then sell. It’s something my business partner in Ohio does quite often. I think the point is that flipping a house is not per se speculating–it depends on other risk factors. Don’t you think?

By: Engineer

Engineer — Thu, 02 Aug 2007 03:52:23 +0000

@DR
I would agree with your point, except I would call example #1 clearly a flip, while example #2 is not.

And example #2 is further distanced from being a flip if you live in the house long enough (24 months) to get the $250,000 exemption on income taxes from your gain.

By: Paul

Paul — Mon, 18 Jun 2007 00:07:37 +0000

I just invested $20K into a house I purchased to flip. I think that investing in a roof, windows, furnace, etc. is comparable to buying machinary for a business. It improves the value of the property to produce more income. This is the essence of investing. Whether I choose to sell that improved asset now or 20 years for now is irrelevant

By: DR

DR — Mon, 11 Jun 2007 12:55:29 +0000

Engineer, in example 2 above, the house flipper makes improvements to the house. In my experience, the improvements generally include cosmetics (paint, carpet, etc.) and more substantial renovations (new kitchen, doors, windows, mechanicals, etc.) Under your definition of investing, would this not be improving the ability of this asset to produce?

By: Engineer

Engineer — Sat, 09 Jun 2007 20:23:25 +0000

Way back in college, I took an economics course. IIRC, investing is defined as the purchase of capital equipment, i.e. improving the ability to produce.

So, no, flipping houses is not investing.