Flip or Flop, Masters of Flip, Flipping Out, these are just a few of the tv shows dedicated to “flipping” houses. That there are so many, speaks to the popularity of the house flipping industry. However, while these shows do touch on some of the hiccups that come with house flipping; the reality is a lot more complicated and isn’t remedied over a commercial break. House flipping is essentially purchasing property with the sole intention of reselling for a profit. Generally, the property is purchased at a discounted price as a “fixer-upper” or a foreclosure. Here are some of the risks associated with flipping property:
Repairs & Renovation
Flipping houses can be a minefield, one step can take you into a termite invested wall, and another may lead to water damaged ceilings. Unexpected expenses can eat away at potential profits and can be the difference between breaking even or making a loss. Overzealous renovations can also take a chunk out of your budget, be practical and remember, this is not your dream home! Shop around for affordable replacements for obsolete fixtures and fittings, and only repair what is damaged.
Several factors affect the sale of a property. One of the biggest mistakes a seller can make is overpricing. It is important to be objective when setting the selling price, as this can scare away potential buyers. It is also crucial not to cut corners while rehabbing the property, in a bid to reduce expenses. Low quality work and materials will not only appear less attractive to buyers but will cost more to correct. The housing market can be fickle, interest rates and the time of year can affect the affordability of properties.
It is almost impossible to flip properties without using contractors. Incompetent contractors can lead to cost overruns due to corrective work and missed deadlines. Completing the necessary due diligence will ensure that contractors are reliable and qualified. Check the contractor’s work and make sure to discuss any issues or adjustments that are needed.
There is no getting around the challenges of house flipping. Even with mitigation, it is still a lot of physical and mental work. Proper planning and realistic expectations can reduce the stress involved and put some money in your pocket!