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4 Hidden Pitfalls of House Flipping



Recent television shows have made flipping houses a glamorous profession. It looks exciting; the agent buys a pile of garbage that barely looks like a home for a next-to-nothing price, and in an hour, voila! A beautiful home emerges that they sell at a stellar price. It may sound romantic and fun, but the truth is, flipping a home is challenging and risky work. Yes, there are people who are very good at it and make a large profit off of their buys, but if you would like to make it to that point, you have a long and trying path ahead of you. Let this list of hidden pitfalls enlighten you on whether house flipping is the right career option for you.


1. House Flipping is Time and Money Intensive


One of the most attractive perspectives of home flipping is that you can increase the value of the home seemingly indefinitely. The deceptive part about watching a home-flipping TV show, however, is that it all takes place in about an hour. It is one thing to watch other people on TV replacing cabinets and taking out old carpet, but you must consider whether this is something you would be willing to do yourself or whether you want someone to do it. The renovation itself can take anywhere from a few weeks to several months, with unforeseen costs cropping up. You may all of a sudden have to replace the plumbing, or a storm blows off the roof and now you need a new roof. Finding the capital to handle these types of costs can be difficult, with many having to look beyond traditional lending sources, and most using private lending options like hard money loans for fix and flips. You have to be financially prepared to handle the unexpected expenditures in addition to the cost you accrued when buying the home.


2. It is Risky


House flipping is a risky business. Contrary to popular belief, house flipping is not an investment. An investment, in financial terms, is when someone takes a lower than average risk to reap satisfactory returns. An example of an investment would be someone who invests stock in a very stable company. The investment will slowly yet steadily rise over time to make decent returns for the investor. House flipping, however, is speculation. Speculation, unlike investment, involves much higher risk akin to a more educated online trading technique. The speculator performs a lot of market research and then takes a huge risk, hoping to make abnormally high returns. House flipping falls into this category. When you put a lot of money into a home by purchasing and renovating it, you are likely to seek a high return upon selling. Speculation is always a high-risk and high-reward, so be sure that this is the kind of investment you want to make. If so, it is wise to learn more about the world of finance and how to properly invest.



3. Lack of Physical Skill


You will reap the most out of your risk when you use sweat equity. Sweat Equity is the physical toil that goes into making the house look great. This is why skilled building professionals such as carpenters will go into the business of house flipping. They have the knowledge and the skill to do it well at a low price. Someone who has experience in construction will more likely find the best and most cost-efficient way to accomplish their task, and often, they will even do it on their own with little or no help. If you are not skilled or are unwilling to do so, you will undoubtedly have to invest money in someone who will.


4. Lack of Patience


If only a house could be bought and sold in an hour! Unfortunately, that is not the case. A smart professional will take their time to find the right property to buy. This is much wiser than hastily choosing a property and hiring someone to renovate without even assessing your other options. As mentioned above, successful sellers are those who will put in a lot of work themselves, or they will have a network of contractors whom thy trust. They will also have the patience to sell the home themselves instead of hiring a real estate agent.
Heed these tips and decide whether flipping a home is right for you. There are many investment opportunities out there that are easier and much lower risk, with promises of steady returns, so be sure you’re committed with the right resources before beginning this type of endeavor.
image credit: http://www.auditionsfree.com/2015/hgtv-show-casting-people-want-flip-houses-beginners-southeast-atl-fl-la/# http://kincoinc.com/construction/
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