I invented a 3-year flipping rule a while ago after learning from the lessons in past flipping experience from many people. The key mistakes flippers made is failure to exit in time to avoid the market down turn. A lot of people started to flip in 2003, failed to stop by 2005, then by 2006, they all got bagged in…

Countless flippers are now holding high-priced condos along the coast in Florida, can’t sell them and can’t rent them high enough to cover the mortgage, they are in deep sh*t.

Following 3-year rule can potentially avoid such mishaps.

1) Identify the start of the market boom. It may take 1 or 2 years to ascertain the real trend. The margin of error of 2 years will be fine because usually a boom will last 5 years.
2) Once the boom is identified, start flipping in year 1 or year 2,…
3) By year 4 or 5, strictly follow the rule to sell all flipping houses. No emotion attached! No matter how great the market still looks by year 4 or 5, dump the houses, and reap the profit.

This rule is not a pure science, but a mental guideline for myself and whoever understands to follow. The primary benefit of following 3-year flipping rule is avoid ourselves to be carreid away by a market frenzy.

I believe this 3-year rule can be applied to any booming market. It could be used for stock trading as well, although I am no expert in stock, I don’t want to say it would work for stock for sure.

The drawback of this strategy is that you may not be able to reap the entire 100% of the gain for these 5 year. But that’s okay, one can’t be too greedy anyway, reaping 60% of the gain for a cycle shall be good enough for us.