What is House Flipping Pros, Cons – House Flipping Mistakes

House Flipping is when an investor buys a property – not for personal use – with an intention to resale it after making a few improvements to it. Flipping is a great way to generate consistent profit if a couple of properties are involved in the process.

The profit generated through House Flipping depends on the experience of the investor and the neighborhood in which the property is located. A hot area can get you more as compared to one which is not popular among buyers.

How Does House Flipping Work?

In general, investors buy a low priced property and then sell it high. That’s what investors do in House Flipping but the only exception is that they use a buy-and-sell strategy instead of a buy-and-hold. Time is a major parameter in flipping as holding a property for longer will cost more (like mortgage payments, taxes, insurance) and speed is preferred instead of profit in house flipping.

Pros of House Flipping

1. If an investor is living in a flipped house for at least two years of the past five, then the property becomes income tax-free.
2. If you know a bit of plumbing and electrical work, then you can save more.
3. If done properly, house flipping will generate profit as quickly as one can imagine.
4. Through remodeling and repairing, one can gain a handful of experience with the aspects of construction.
5. When you put your first flipped for sale, you will get insights into buyers. What they look for in a property and then you can make the required changes in the next transaction.
6. House Flipping is a great way to learn all the ins and outs of the Real Estate market.
7. With buy-in and sale out of a property, you will get a chance to enhance your Real Estate circle with links to realtors, brokers, and other investors.
8. While undertaking a flip, one can polish his/her vision of analyzing the potential of a property.

Cons of House Flipping

1. First and foremost risk with house flipping is losing your asset instead of making a profit.
2. You may face unexpected expenses as you are at the mercy of building contractors.
3. Once you are done with house renovation, chances are you end up paying more property tax.
4. The longer you hold the property, the higher will be the holding cost. So, if you can’t find a buyer in time, you will lose a large chunk of your budget.
5. From buying a house to selling it, stress accompanies you. House flipping is a stressful thing to do if you are new in the market.

 

House Flipping Mistakes

If you have just kicked off your house flipping career, we recommend you to read and avoid the below-mentioned mistakes that most newcomers make.

Insufficient Funds

Not every house down the street is ideal for flipping and you can’t turn every piece of land into a reality show-style renovation. There are many properties that require only basic amendments and you must target these. Target only those properties which are in your budget.

Think Anyone Can Do It

Although house flipping does not require a property license still you must have enough experience to make it a profitable business. Sitting on a sofa and watching TV will not make you a millionaire through flipping.

You Can’t Do It Alone

You need a proper team to convert your investment into long-term profit. Seek the help of an experienced real estate agent, house flipping mentor, and a construction company.

It’s Not A Part-Time Business

According to the experts, it is too difficult to become a house flipper if you are engaged in a 9 to 5 job. You can’t handle on-site issues with a full-time job. If you want to invest in house flipping, invest your time and energy as well.

Summary

House Flipping can be a quick way to make a consistent profit but it needs proper planning and experience. Before you set your sight on a property in Manhattan for flipping, make sure you get your finances in order.

Remember, home flipping also comes up with a huge loss not only in money but also in the form of time and energy. Flipping is not as easy as it looks on TV and before you dig deep into the world of flipping, save something in case you lose money.

Related Article:

Flipping a House: How to Find Houses to Flip
Everything You Should Know About Flip Leases