Let’s get one thing straight: the kind of real estate investing you often see on the television flipping shows is not true real estate investing.
Sure, it involves putting money into a deal and expecting to make something back. And yes – sometimes these individuals make incredible profits.
However, the kind of real estate seen on the flipping shows is more closely related to the buy-wholesale, sell-retail model of a clothing store at your local mall than it does to real estate investing.
As Glen mentioned in his popular article, Seven Ways to Get Rich Quick, many people have tried to “get rich quick” by buying real estate only to lose it all when the market dropped out.
Flipping houses, as well as most development, raw land purchases, and betting all your chips on “black” is not investing but rather “speculation.”
Speculation involves taking a high risk with the potential of earning a high reward, often in a short period of time. Investing involves taking calculated but dependable risks with the assumption of earning solid returns.
It’s important that for you, as someone looking to grow their financial position in life, to make that distinction in your mind now, rather than later.
Now, don’t get me wrong: house flipping can be fun, profitable, and entertaining.
However, flipping houses involves heavy risk with a smaller hope of return. It’s a business, at best, and while it can be exciting and profitable if done correctly, it’s not what I want to talk about today. Millionaires are generally not made through speculation (at least not for the long haul.)