We are conditioned to think that the wealthy real estate moguls got that way through glittery, glam, and gilded mansions. In reality, many of the world's rich and famous arrived flipping ugly houses in the multiple listing service. Buying ugly houses and flipping them is very profitable, for those who know how to see beyond the blemishes and cosmetic flaws.
Among investors, it is often said, "Never buy the best looking house on the block." The logic behind this is that the best looking properties cost the most. Buying them only drives up the prices of the houses around them, doing a service to those who own the fixer-upper mutts on the street. And if you happen to be the proud owner of the worst looking house on a street where other houses are fashionably turned out, your property will look like a bargain and a diamond in the rough. Do nothing to it, and the value of it will still rise, thanks to the fact that it rubs elbows with the expensive homes.
Do a little cosmetic work - such as paint, a new roof, and some landscaping - and you can turn a ugly house flip into the best house on the block. And your profit margin will far exceed the margins of those houses that had expensive remodel before investors purchased them.
Within the economic theory of capitalism, added value is an important principle. If you can add value to a commodity, you can reap the rewards of capital investment in the classic value-added equation. Buy the worst looking house on the street, make it pretty , and you can flip it for cash.
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