Flipping houses isn’t just as simple as buying a property for cheap and then doing minor renovations and selling it. Hard work, careful planning, and meeting regulatory requirements are part of the job description. In this article, we’ll take a look at the pros and cons of flipping properties to see whether it’s for you or not.
The Upsides of Flipping Properties
It can be Quick Money. One of the main reasons why many people look into flipping houses is because you can make a quick buck out of it, especially when done correctly. Flipping houses can net you a profit of somewhere around 20 to 80 thousand dollars if you successfully purchase and then sell a house.
Of course, the profit will largely depend on the location, the property itself, the time or climate of purchase, among other things.
You’ll Learn More About Construction and Renovations. Here’s something highly useful if you’re in this industry for the long haul: You’ll learn more about renovating, remodeling, or reporting a property.
You’ll have a better grasp of how much the materials and labor would cost, what kind of electrical or plumbing repairs are necessary, and other similarly important aspects of repairs. This knowledge can only be gained through experience and will be invaluable, especially if you intend to do this seriously.
You Get to Control Your Job. Being that you’ll be the one sinking resources like time, money, and energy into flipping a property, you’re well on your way to being your own boss. You’ll have to hire a team, organize them, work with 3rd party service providers.
But ultimately, you’ll be the one deciding and calling the shots. This is a business that requires a lot of work, but it’s work that you can decide for, making it more than worth it because you’ll be controlling your own pace.
You’ll Gain More Real Estate Market Knowledge. Through purchasing dilapidated properties, learning more about the market, fixing them, and selling them again, you’ll know more about the real estate industry as a whole. This is a benefit since real estate knowledge will come in handy quite a lot.
You’ll Expand Your Network. When organizing a renovation project, you’ll have to connect with your contacts. You need a wide network of people, from real estate experts, lawyers, renovation contractors, laborers, building inspectors, and repair professionals. Which will work out for you in the end as it will result in a wider network of people you can ask for help for future projects.
The Downsides of Flipping Properties
There’s Always a Risk of Losing. The glaring issue when flipping properties is it can fail. Not just the renovation process but the actual reselling process. It can take time to renovate and even more time to sell. This will result in longer periods where you won’t make a return on your investment and can affect your revenue stream.
Unforeseen and Sudden Expenses. Because there’s always a risk of failure, there will be times when you’ll have to inevitably shell out more money to accomplish a project. No matter how well you budget your finances, unforeseen circumstances can require spending more than you projected.
These expenses can quickly accumulate and result in a rather skewed return ratio, and market conditions might even force you to sell below the optimum price to make ends meet.
Taxes! The moment you finish your renovations, the tax situation might be a little different from what it was before. If you add a feature or change significant portions of the property, certain laws will regulate it, and it might result in a change in taxation. Should you successfully sell it, you’ll also have to pay capital gains tax. This tax will depend on how long you’ve held the property, so there’s always that to consider.
It’s Still Work. Even if flipping properties is your dream job, there will still be hard work involved. And much like any other work, you might experience stress.
You’ll have to worry about finding the appropriate property at the right price, you have to deal with many people to successfully pull off the project, you’ll still have to meet deadlines, and of course, find a buyer. These aren’t exclusive to day jobs, and flipping properties isn’t exempt from these woes.
If you love real estate and have an eye for renovations and repairs, this is definitely for you. Otherwise, perhaps it’s best to look at other real estate investment strategies, preferably one that fits your personality.