House flipping sounds good, right? Transform a home and give it that fresh new feel, but how would you know that you are gaining and not wasting your money? You might notice in some TV shows where they show “house flipping” and thought “I can do that, it's so simple and easy”. These programs often show one side of the story and not the whole story of house flipping. For example, the person working behind the scene are professionals with big budgets and the audiences including you rarely see the dirty work.
If you are planning to buy a home to flip, you might want to keep in mind the pros and cons of house flipping.
Beware of money pits when buying the home! That’s the main reason why most folks are into real estate flipping. Even some companies and individuals find flipping homes a profit-making venture and if done correctly the returns might be achieved in a very short period of time.
The experience you gain! Although house flipping might take a lot of time and money, there is a lot of valuable experience you can learn throughout the process such as subcontracting to help you advance your negotiating skills. You will not also learn about construction and real estate investing through the process of balancing a budget and ensuring a project is still profitable.
House Flipping is Gratifying, especially seeing the project to the end. Although your main intent in flipping houses is to make a profit, you’ll also learn that there are many things you can gain in flipping houses and not just money. When you rehabilitate and sell an old home, you’re not just selling it but also giving it a new life. You take all the unnecessary stuff and change it into something new for the new family to make new memories in. That is the most gratifying reward you might ever receive.
There is, of course, the other side of house flipping. There can definitely be risks and stress involved in the process and it’s not a 9-5 job. Here are some risks or disadvantages of house flipping.
You can be putting your money at stake. You can’t achieve something big without taking the risk. There are a lot of factors that can contribute to making a property flop instead of flip. One of the contributors to this loss is the unexpected expenses, even with careful caution and planning, with just a small cracked foundation, need of new plumbing, contractor delays, change of weather, and unplanned materials that you didn’t expect. All of these will quickly add up and may consume the potential profit. A change in the real estate market is also a problem in flipping a house. If you’re not able to sell the home ( assuming that there’s a mortgage on the property) you will have to pay the mortgage, taxes, and insurance. This will also take a huge part of the budget, after the renovation and the property is ready to sell, the longer the property is in your hands, the more money you lose.
There will be stress involved! You can’t run and hide from it, especially if your business is flipping houses. You will get stress with things like delays, the plan didn’t go as to what you expect it to happen, overdue deadline, finding the right property, contractors, buyers and etc. But the bright side is, the more things like this you run into, the more experience you have and the wiser you will be on the next project.
If you are considering flipping homes, make sure you reach out and I’d be happy to point you in the right direction with properties!