Is it a viable option or an HGTV myth?
The concept of flipping houses, although popular for the last 20 or more years, has reached a fever pitch with television shows portraying couples and individuals making small fortunes flipping homes. Flip or Flop, featured on HGTV, tells the story of a now former couple who make their income by flipping homes in the California area. While shows that sell the concept of flipping houses are a dime a dozen, you have to wonder if it is actually a feasible proposition. There are a few things that are required to truly make flipping a viable income.
Up Front Money
Flippers will often taut zero down financing that they utilize to buy a house and then fix it up, but there are some serious downsides to such financing. Finding a legitimate lender in the current real estate landscape can be difficult, and first-time flippers often make the mistake of not considering the interest they’ll accrue before the house sells. Up front money, even in the form of a down payment, can make it far easier to find financing, and garner a better interest rate.
A Handy Skill Set
Plumbers, carpenters, contractors, and roofers often get involved in the house-flipping trade, and for good reason—they have the skillset needed to make the proposition profitable. When one can do much of the work themselves, they are more likely to make a profit. For would-be flippers who don’t have a practical skill and need to hire out for all house-related jobs, the likelihood of making a profit, or even breaking even becomes more dismal.
Real Estate Knowledge
Knowing when to buy, where to buy, and how much to pay are fundamental skills that are needed to flip homes successfully. When you are looking to turn over a property quickly, you’ll need to know if the home is in the right neighborhood to sell quickly. Houses in good school districts, quiet neighborhoods, and up-and-coming locales move the quickest, but they often have bigger price tags attached. Experts suggest finding a partner who has real estate knowledge if you, yourself, don’t have that type of information. You can also do the research and gain your own skillset before you buy a home by taking classes or reading through online guides. Part of flipping houses profitably is about luck, but a much bigger part of the equation is about skill.
Proper Expectations
If flipping houses is something that interests you, checking your expectations is the first step towards success. Experts note that a novice and a professional differ on their expectations. Professionals know that profits might be marginal and that breaking even or even losing money is a natural part of the profession. Novices expect to make a huge profit with little effort involved. While stories of people netting 80-100k in profits on a flip seem to be the norm, experts warn that it is actually unlikely to happen that way. Profits can be as slim as $5,000-$10,000 on properties, and you have to consider the amount of time you’ll need to put in to make that 5k-10k check.
Is flipping houses a viable career path for most people? The simple answer is no. Experts agree that the most successful flippers already have a skillset in the real estate and renovating world, and know how to approach flipping properly. These skills can be learned and success can be had, but jumping in cold, advise experts, is financially dangerous. If you are interested in flipping houses, consider working with an experienced flipper to gain knowledge and experience in the field.
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