There are dozens of TV shows that follow professional property investors who flip houses for a significant profit. Watching those shows, you may start to ask yourself if house flipping is really worth it. If you look online, you’ll see hundreds of articles from people who claim you can make millions flipping houses, but is it true?
Like any business, there are advantages and disadvantages to flipping houses. Yes, you can make a lot of money doing it if you are successful. However, there are major financial risks involved that you need to be prepared for before moving forward. While there are people who have made millions flipping houses, there are also people who have lost everything trying.
Here are a few things to consider when deciding if flipping houses is worth it.
1. The Market
The housing market in your area will play a significant role in your ability to make money flipping houses. You need to buy houses at a price low enough for you to make the needed renovations and still sell at market value. In some areas, you may find that even houses that need work are selling too high, or their resale value is too low to flip successfully. A good mindset to take into the process if you want to find the worst house in the best neighborhood to have enough financial room to make renovations and resell.
2. Your Knowledge
How much you know about the housing market and house renovations will greatly impact your success flipping houses. You can always learn what you need to know, so lack of knowledge should not be an absolute determinant of whether or not you should try house flipping. When you look at houses to potentially buy, you will have to know what you are looking at to determine how much work will need to go into the renovation. You’ll need to look at the HVAC system, specifically the air conditioner and the furnace, but also the thermostat and the ductwork. You’ll need to look at the circuit breaker, tile, and attic when doing the inspection. You’ll need to determine if the house requires a full kitchen remodel or bathroom remodel because those can get expensive. You don’t want to deal with failed ductwork, so call in a professional; you need to know what kind of help you are going to need before you buy the house.
3. Your Ability
How much of the work will you be able to do yourself, and how much will you need to hire professionals to do? This is an important factor in possible success. The more work you need to contract out, the higher your renovation costs are going to be. However, it is important to remember that paying more to have something done correctly is more valuable than doing it yourself incorrectly. For example, CMK Construction is a company located in the Tampa Bay region, and they have years of experience in bathroom remodeling, among other things. If doing the bathroom remodel yourself is not a viable option, you will need to bring in a professional like CMK to create a bathroom that buyers will want to own.
4. Potential Profit
When you find a house that you think will make a great flip, you need to sit down with a list of things needed in the remodel, call around to get estimates for what you can’t do yourself and figure out the actual potential profit for the property. Too often, people buy properties without an accurate picture of potential profits and lose money on the project. The lack of an accurate picture of potential profit can come from lack of knowledge, lack of research, or not factoring in the unknown. When flipping houses, you always have to factor in at 10 percent extra for unexpected problems and expenses because there is a lot you won’t know until you start the renovation.