Where the real profit in flipping comes from?

[Alex R.]

Well, I hear that flip itself doesn’t create profit and time and effort spent make the property sell at faire market value.

Meanwhile flip is not (or should not be) dependent on house value appreciation.

So when you flip a property and make profit, where is the money really coming from?

[J Scott]

The whole "you make money when you buy" vs. "you don't literally make any money until you sell" discussion reminds me of a guy I studied martial arts with for about 10 years.

For 10 years, our sensei would talk about "muscle memory" (the idea that if you perform the same physical action thousands or tens of thousands of time, it become engrained in you to the point where you do it perfectly as a reflex without thinking about it). Clearly, everyone with a bit of understanding of biology understands that "muscle memory" is formed by synapses organizing/firing in a certain way in your brain (since your brain controls your muscles along with everything else in your body), but this guy was convinced that everyone else thought that muscles really had a memory. Every time someone would use the term "muscle memory," he'd complain that "MUSCLES DON'T HAVE MEMORY!!!"

This conversation feels the same way. While some may talk about "making money when you buy," most of us understand that LITERALLY, you don't make money when you buy. It's a phrase to highlight a key point in investing -- that if you want to consistently make money, you need to make the right choices at the purchase more than anywhere else in the process.

That said, I will concede that you don't literally make money when you buy (unless you finance for more than 100%)...and also that muscles don't really have a memory... :)