The pure concept of property flipping may seem simple. You have to buy a property, do some work on it and sell it again.
But it is far from the actual situation, with a lot of factors to be worried about. First find the right price to buy it for, as well as contractor, and then decide what will you need to fix, maintain that, estimate the price after fixing and actually sell that house. So it is far from an easy job, but can it actually be profitable in the long term?
Most of you, seeking to do a property flipping job, see ads on TV, where people are making more than $100k, for one flip. The reality, though, is a little bit different, with houses now being much more expensive, and you still have to put in a lot of money on reparation as well.
Considering this, you can still make more than a good living, but you could also lose everything you invested with few bad moves. There are few certain things that you might need even to get started:
- Along with the credit score, you will need cash. The best thing you can do for yourself is to save up and actually buy it directly, with no further complications and procedures, and that way you save yourself from paying mortgage insurance, etc.
- You will want to make sure that your real estate market knowledge is on top of your game. What you are trying to achieve is to find a house in a nice location, repair it and sell it quickly, because if you cannot you will be left with paying mortgage and loans just for yourself.
There are few mistakes that flippers make, with most common being: lack of skills, patience, knowledge, time and money.
- The first thing that you are trying to do is to negotiate the price that you buy it at so it can be as low as possible. This involves great skills of verbal communication, and you have to be outgoing as well, making a statement, every time you speak up.
- Also as we said, knowledge is power, and if you bought a good house, now you have to see how you can actually repair it without wasting too much money and still flipping a good profit. For this, you might even hire a mentor, or consult with someone, who has more expertise in this, and from whom you can learn. Know your local market, and the demographics of certain areas so you can estimate where it is the best to invest money.
- Time and patience, kind of go together, as you cannot expect that money falls from the sky. Yes, you do not want that house stays too much in your possession, as you have to pay all loans and taxes, but you have to invest time in actually repairing it, and estimating the value and target group you are looking for.
- After you have done the renovations, your main task is too show off the rehab of the house to your potential customers, by comparing how it was before and how it was now. If you do a good job in the process of repairing, this can only benefit you.
According to some statistics, if properly done, a realistic profit can be around 15%, of the money that you invested.
So let’s say that the house with fixings and taxes costed you around, $150K, you would have a bit more than $20k of pure profit. This for some might not be much, but it is more than enough, if you do your job the right way and at the right time. And no one denies that you could even get a greater profit.
There is no doubt, that property flipping is a section of real estate industry, where high risk is included. But you can get rewarded for your effort if you proceed with caution.
It is important not to get discouraged, even if you do not sell the house right away, learn from that mistakes, and do better next time. Everyone has ups and downs, it is just a matter of who will end up being on top.