Is Flipping a House Easy?

Home renovations can easily go over budget.

House flipping is the process of buying a house that is in need of renovation, fixing it up and selling it at a profit. Some house flippers are unethical and do shoddy work in the interest of quick profit, while others work hard to renovate a house properly yet quickly so they can resell it before mortgage payments eat up their profits.

Risks

There are many risks involved with flipping a house that people ignore because they want to believe that it's a quick and easy way to make a lot of money. If the market slows while you own the house, you could have trouble selling it. If you get into renovations and find problems with the house that you didn't anticipate, it will cost you more than you expected. This is common enough that you should expect it to happen, even if you don't know exactly which unpleasant surprise may be sprung on you. If you get carried away and spend too much to buy the house, you may end up selling it with no profit.

Carrying Costs

Houses that you buy to flip will cost you money every day that you own them, just like the house in which you live. If you have a mortgage on the property, you will be paying interest on it. You will also be paying for taxes, insurance and utilities. This is just to own the house, before you've begun to do work on it. You will also be paying a real estate agent and a lawyer when you buy the house and again when you sell it. All of these costs need to be considered before you buy if you hope to make a profit on the property.

Things to Avoid

Unless you are a very experienced contractor or renovator, avoid houses with serious structural problems. Projects such as jacking up houses, replacing foundations or completely gutting an interior are best left to professionals. Even if you are able to do these things without mishap, they will almost certainly absorb any profit you hope to make. Don't buy a house in a dangerous or run-down neighborhood. It may be tempting, because these houses may be very cheap. Keep reminding yourself that they are cheap for a reason.

Conclusion

Flipping a house is not easy. If you take the time to do your research before buying, and you are smart enough to get advice from people who know what they are doing, you can make a profit buying and selling real estate. The more you look at it as a long-term learning process and the less you try to get in, get rich and get out without much work, the more likely you are to avoid disaster. If you make it through your first flip with a profit, congratulations. The next one will probably be easier.

References

• MSN Real Estate: Flipping Houses is Harder Than It Looks
• Million Dollar Journey: Flipping Houses for Profit