I’m willing to bet you’ve spent time on HGTV watching the renovation shows. I mean who wouldn’t want to purchase a distressed property, make it beautiful, sell it, and make $50k? While this looks so glamorous, there’s a lot of flipping issues that go unseen. Check out these myths that you are likely to encounter if you decide to become a fix and flipper.
- It’s easy! While TV makes it look easy to do, there are a lot of unknown stresses. What if your contractor doesn’t show up? What if permits aren’t pulled correctly? What if you accidently move onto the next step without getting the city to inspect the previous step? There are a lot of moving parts and without a background in construction, it’s easy to miss something.
- Flipping houses is fast! TV makes it look like flipping takes a month or two. Sure, this is possible if you’re an expert. Again, there’s so many moving parts. You have to deal with homeowners insurance, HOA assessments, prorated taxes, sometimes probates, title insurance, liens or judgements, permits, inspections, and that’s just the start. A novice flipper can expect it to take much longer.
- It’s a quick way to turn a profit! While turning a profit is the goal, a lot of novice flippers don’t consider the carrying costs of holding the property. When the property takes longer to complete than anticipated, it cuts into the profit. Also, unexpected issues or repairs that come up can sometimes turn your profit into a loss.
- More money, more profit! Keep in mind the higher the price of the house, the smaller the buyer demographic is. Higher priced properties naturally cost more to hold and you could be holding it for longer since the buyer pool is smaller. Having a higher priced house doesn’t necessarily mean a higher profit.
- You need a lot of cash! Perhaps it works in your favor that you can take out a home equity line of credit or a home renovation loan to do a flip. However, cash is always ideal since novice flippers will have a hard time getting a loan without previous flipping experience.
For more tips on creating your perfect flip, send me an e-mail at firstname.lastname@example.org.