You Want To - But Should You - Flip Houses?

Name one industry for which the saying, “everyone else is doing it” just doesn’t apply.

If you said real estate - hats off to you.

Even if your intentions are reasonable, they stand against big challenges. Buying and selling real estate to turn big profits isn’t easy. Before you dive into flipping, here’s a list of common motivations held by potential house flippers and how they don’t always pass the test of true experience.

You have a lot of money

OR

You want to make a lot of money

TV shows and wild success stories online teach people that flipping houses is all about raking in the profits once you sell. But experienced flippers will squash that myth quickly. Realizing profit starts with buying the house you want to flip and figuring costs backwards. Success depends on a reasonable estimate of costs to bring the property up to market value is key. What renovation is required? What materials are needed for the project? How much hired help will be involved?

It takes a lot of money to fix and flip. Even if purchased a cheap house and think you have the funds to flip – realize that making money depends upon the margin of error. Outlays are almost always more than you figure.

Another consideration is if you take a loan out on the property you intend to flip. If things don’t add up, dealing with a mortgage for a house you never intended to keep can be a nightmare. Foreclosures aren't fun. Make sure you know the worst-case scenarios of getting stuck with an unflappable property. If you want to stop a foreclosure, consider selling to a cash home buyer.

First-time flips are unlikely to make you a millionaire. Keep flipping and your estimation skills will improve each time and hopefully you’ll widen your percentage return on investments over the long run.

You have time

OR

You only have a certain amount of time

Once you have a handle on the financial expectations, you need to get serious about the time involved in flipping houses. It doesn’t matter how much you clear your own calendar – the real estate market runs on its own watch.

You take one wall down only to reveal what’s underneath – another seven things in need of repair. Or, you set aside a month for the bathroom remodel only to find out the plumbing needs a total overhaul. Unexpected house remodeling costs which can break the bigger budgets and the most forgiving timelines.

If the local market takes a turn, you could be forced to change strategy. Waiting for prices to recover before listing and selling, can cost you months, maybe even years. Flipping a home can feel like a sprint, but it can also be a marathon.

You know people

OR

You want to flip houses by yourself

You can enlist an army of people – contractors, inspectors, carpenters, investors and neighbors – but they don’t guarantee you a  quick home sale or maximum profits. Nonetheless, house flippers will bring you in touch with experts from many industries. Bear in mind that just because your friend is an agent doesn’t mean she’s going to extend herself to your every need. Also, friends need to make money too. Expect to pay their fees and commissions for service. Don’t expect to get a discount from everyone.

If you’re taking cue from reality TV, you’re probably familiar with the challenges (and drama) involved in flipping properties with partners. It’s fine to want to go it alone but think about the wealth of knowledge you might miss out on. The internet is useful but cannot be your only source. From finding a house to flip, construction permits and city codes to home staging – keep in mind that being in touch people is hardly a choice.

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A lot of people do it. And some do it very well. Flipping houses requires coordinated diligence, unknown periods of time and well-managed money.