Have you ever tuned into the likes of HGTV or TLC, watched a house flipping show, and thought to yourself, “I bet I could do that!”? If you have been considering whether or not you should get involved in house flipping, it is important to know the pros and cons before you begin.
An investment of this degree can be quite risky and the outcome can go either way. That is usually how investments work. If you are fortunate enough you will have a positive outcome and gain rewards. Otherwise if everything doesn't go as planned, you can be left at a loss from a negative result.
Purchasing properties to rehab and resell has perks, but downsides as well. Here are some of the pros and cons to consider before becoming a full-time house-flipper.
Pro: Making Money
The obvious reason to flip homes is to make a significant return on your initial investment. It can be a lucrative business if doing it full-time.
The profit margin of a successful fix-and-flip can be anywhere between $40,000 and $70,000 for the average residential home.
Be sure to account for cash you’ll need for closing when selling a flipped home by using a seller closing costs calculator. This can help set your asking price.
Con: Losing Money
On the flip side, there’s a large risk of losing money, particularly when dealing with properties that are bought through auctions or foreclosures.
In this case, you may not be able to do a full inspection and determine any issues ahead of time, resulting in more costs than anticipated.
Pro: You Can Take Time to Choose What’s Suitable
As a home flipper, you can scout the market to find homes that do well in categories most important to you, such as location, sale price, financing, and property type.
Properties that need work are often priced well below potential market value, and may require a smaller cash down payment.
Con: Potential for a Disagreeable Market
If you find yourself amid a real estate market that is not favorable for sellers, you could end up holding on to a property longer than you would like. This means paying the mortgage longer and losing money.
Pro: It’s very rewarding
Sure, you may get into flipping houses for the money, but there’s so much more that comes with the job.
Revamping a home is taking what is essentially an eyesore and creating something new and beautiful out of it. It’s giving homes to people for making memories.
Con: It takes a lot of time
This is not the type of job you can do part way if you want to be successful. Flipping homes involves hours spent researching properties, building relationships with lenders and contractors, and supervising the completion of the actual project.
Pro: Builds personal growth
Flipping homes requires you to hone many skills. You will learn about construction and real estate. You’ll become better at networking, and build up your own.
You will become a better negotiator and, overall, a better communicator, as communication is key when it comes to dealing with the many people needed to complete a house flip and sell.
Con: It’s stressful
You’ve hit a dead end and there are no good properties on the market. A property you just sunk a lot of money into has much bigger fixes needed than originally thought. Your flipped house has been on the market, but no one seems to want to buy it.
There are a lot of variables when it comes to house flipping, and all can add up to stress.
Do you know of any other pros and cons of becoming a full-time house-flipper?
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