Pitfalls of Flipping A House
Flipping a house looks fun, easy, and profitable, doesn’t it? Take a house that needs some major updates, make the renovations yourself, sell it at a higher value, and profit. It’s something you as a real estate agent might consider doing yourself, as you see tons of houses and know what house-hunters are really looking for.
However, before you break out the sledgehammer, consider the potential pitfalls of flipping houses. More importantly, know how to avoid them.
One of the worst things that can happen when you’re working on a big renovation project is running out of money. If this happens you’re left with a house that’s half-finished, which will be unappealing to potential buyers. Or worse, you could buy the house and then realize you don’t have enough money to actually flip it. Both situations leave you losing profits.
When you’re looking to make a profit from flipping a house, you need to be sure the final sale price exceeds the combined cost of acquisition, holding costs, and the cost of renovations themselves. This is why you need to budget carefully before starting any project. Make sure to leave some wiggle room in case renovations go over budget. If the renovations you’re considering are more expensive than you can afford, you may want to cut your losses and instead just sell the house as-is.
DIY vs Hiring Professionals
Do yourself and your future buyers a favor and ask yourself a question – how good am I with a hammer? There are some renovation tasks that you can probably do yourself. However, there is often a darn good reason why plumbers, carpenters, and electricians are paid a lot of money. It’s because these jobs are not easy and take professional training to know how to do correctly.
If you’re someone who’s handy and knows what they’re doing, you can save some money by doing the job yourself. But if your skills are clearly amateur, please call in trained professionals. Otherwise, you could make a mistake that will be even more costly to fix, either by you or your buyer. If you plan to flip houses regularly, partner up with a reliable contractor who can take some of the load off. This may sound expensive, but will actually save you both money and headaches.
Timing Is Important
Every good real estate agent knows that the housing market is constantly fluctuating. This is why if you’re planning on flipping a house, you need to be smart. You need to know when to buy the house, how long it will take to renovate, and whether the market will be good by the time these renovations are finished. Even if you get the deal of a lifetime, a profit isn’t guaranteed. You could buy a house for next to nothing, but taking too long on renovations and reselling the flipped house when the market is bad means you won’t make much money off of the investment. Watch the housing market, pick your projects carefully, and strike while the iron is hot when it comes to selling.
Flipping houses has its pitfalls, but it also can be profitable when you plan it right. With the right planning and a little elbow grease, you could create someone’s dream home and do well for yourself at the same time.