Flipping houses may seem like an easy and glamorous way to invest your money and build your wealth HOWEVER like all investments there is risk involved that you should be aware of before investing any money. I'm not trying to be pessimistic since there is big money and lots of financial benefits that go along with investing in real estate and flipping houses, this article will focus on the main pros and cons of investing in real estate and flipping houses.
Advantages Flipping Houses
Improve your Budgeting Skills
There are few investments that will provide a crash course in budgeting quicker than flipping a house. To be able to profit from your flip you be able to or learn to budget quickly or you will wind up quickly watching your profits go down the toilet. Being able to NOT ONLY set a budget but also stick to the budget is necessary skill required by any successful house flipper. being able to set and stick to a budget will also be a great help is all other finical aspects of your life.
Attention to Detail
Being able to pay attention to details is huge benefit for investors who flip houses, this skill will improve with every flip you do. The profit, when flipping houses is often made or lost in the small details that some people simply miss. Small details also tend to really make a difference when it comes to potential buyers, seeing a home that is properly cared for rather than just another house on their list of places to see can make the difference between getting and offer or not. The attention to detail skills you will and must learn to be a successful house flipper can also be great assets in other aspects of your life from your 9-5 job to your personal life.
Improved Credit Rating
Being able to successfully buy a house and flip it for a profit will greatly improve your credit score and future borrowing power since banks will take into consideration past loans you have taken out and paid back when you flipped previous properties. The more money the bank will lend you (known as borrowing power) for future flips will make a significant difference in the properties you can buy and profit you can make on each flip.
Top Mistakes as New House Flippers
Flipping houses is not as easy as it looks on T.V; it's a lucrative and tremendously risky business that is not for the faint of heart. Unfortunately for those in the business, making mistakes can be extremely expensive and financially damaging. However, if you know what you're doing and you avoid some common mistakes, flipping houses can be a financially rewarding endeavor. Before you decide to flip that house, you should heed this advice.
Starting With Nothing- There is a huge misconception out there that you don't need a lot of money up front when flipping homes. However, what many people don't realize is that your property may not sell right away. Then are you prepared to make mortgage payments for up to a year? Do you have enough money to pay taxes on the property? Not asking these questions ahead of time may leave you in huge financial debt if your home does not sell right away. Plan ahead of time and know what your strategy will be if you do not unload your home right away.
Hiring a Shoddy Contractor
Before you have the house renovated, always check if the contractor you've hired is licensed. Hiring a sub-par contractor could mean the difference between profit and problems. Make sure you have a contractor with all the renovation estimates before you purchase the home. Hire someone you can trust, someone you know is experienced, and someone that comes recommended by people you know.
Another huge mistake when flipping a home is purchasing a property that is too far away. Simply put, if you want things to be done that way you want, you have to be there to oversee operations. You have to be on site for inspections, renovations, etc. and buying a home that is out of state will make this impossible.(Beginners)
Not Having an Exit Strategy
The most devastating mistake you can make is not having a realistic exit strategy in place before you sign the purchase papers. It is essential to know what the value of your home will be post-flip. Therefore, you have to know the current state of the market in your area and have both a marketing plan and selling price in mind before purchasing a home to flip.
Not having enough money
Dabbling in real estate is an expensive hobby to have. The first expense you will incur if you decide to flip a house is the property acquisition cost. Financing the acquisition will require you to pay a certain amount of interest as well. Don't forget to factor in renovation and remodeling costs, as this will form a bulk of your expenditure. Make sure you have enough money to handle these expenses, otherwise you'll incur a major loss.
Not having enough time
Renovating and flipping a house is highly time-consuming. It will take you months to find the right property to flip. Once you've found the right property, you have to put aside time to fix the house. After renovating it to perfection, you'll have to wait till the market appreciates before you can sell it. Do not embark on this journey if you don't have the time to do so.
Not having enough skills
Skilled professionals are equipped with the skills and technical know-how to successfully flip a house. They are highly experienced, and can do it with ease. If you aren't a professional, and are thinking about flipping a house, I suggest you think twice. You might not be able to flip it in a professional manner, and this might set you back professionally.
Not having enough knowledge.
To successfully flip a house, you need to pick the right property. You need to know which renovations are essential, and which ones to skip. You need to be smart enough to figure out when to cut your losses and get out before your project becomes an utter fail.
Not having enough patience.
Flipping a house demands time and patience. You need to wait a while before coming across the perfect property to flip. You need to understand that the real estate market is dicey and ever-changing, and that patience will reward you. If you don't have time to spare, forget about flipping.
Never undertake house flipping if you don't have the confidence to do it. After all, you must stand up to different people including contractors, vendors and inspectors if you want the best prices on the things you need done. Believe in what you feel but also take the suggestions of those who know better than you about certain aspects of your home. Remember you are spending your money so get the most out of it; don't get taken for a ride.
If you want to see your dream become reality, you need to stay focused. You need to be slightly pigheaded to go through your first flips. However, you need to remember that flipping houses isn't as easy as one makes it sound. It's not the easiest way to make your living but it can be done. Potential flippers are always on the lookout for the one property that will get them the most profit. However, if you've got a home that's just under your skin, you'll have to push yourself to get things done.
Above anything else, you need to be excited about flipping your first piece of property. You need to keep that excitement up even when you get bad news about the house and the costs to deal with it all. Excitement is a great ingredient to have for flipping houses.