Home Flipping: The Good and The Bad

Published on August 10th, 2017

Have you ever watched a home flipping show then realize you can’t turn it off?  This is because home flipping can be really exciting and fun! Ideally, real estate flipping is when an investor buys a house for a “good” price, updates, repairs and renovates it, and sells it for more than they paid originally to make a profit. Like most projects, there are pros and cons to be aware of when house flipping.

The Good:

Profit

The main goal when house flipping, is to make a profit. You hope all of your time and hard work is put to good use. Profit comes from adding value to the home as you make updates. Renovations increase the home’s value so you can earn your money back and more after you sell it. Doing the labor yourself, saves you from contracting out, which helps increase profit.

Gaining Work Experience

Real estate flipping takes a lot of hard work, but as you work on the house you gain a lot of experience. These new skills can be taken with you to your own how as well. You will learn how to make necessary repairs and improvements to the home, make a budget for the project, and understand the market more and more with each home.

Excitement

House flipping is exciting! When you find a house with potential, you will work off your vision for it as you put in the hard work. Over the course of the project, you begin to see your vision come together. Anticipation of the final product and a happy home buyer makes the whole process worth it.

The Bad:

Loss

When you get into the house flipping market, you are taking a risk. There is a possibility there could be unanticipated expenses such as permits, delays and unforeseen hazards. There is a chance the house could sell for much less than expected, which cuts into profit.

Expenses

With home flipping, come expenses that can vary from home to home. Some of these expenses include rehabilitation costs, financing costs, carrying costs, and realtor’s fees. The amount you pay in rehabilitation costs depends on the amount of work the home needs. Also, as you add value to the home, the city may increase the property tax on the home – which you’ll have to cover until you sell it. This would then increase your carrying costs. Time is of the essences when you’re flipping a house. The quicker you can make the changes and sell the home for more than you paid, the better!

Pressure

Set deadlines during the process so you stay on task. Finishing the project on time is essential to making a profit. You will continue to pay the mortgage and holding costs, if the home is not sold in a timely matter. Trying to complete the project too quickly can put a lot of stress on you and your team and may result in low quality work. It is important to be intentional about finishing the home flip, but also put in the time it needs to be the best it can be.

As you can see, there is a lot to think about when deciding whether or not to start real estate flipping. If you would like to learn more about real estate flipping or are ready for a mortgage, contact a member of our team at 1-844-77-vLoan to discuss your options.

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