What Is House Flipping?
In the real estate sector, you may have heard of the term “house flipping.” Many of its proponents tout it as a great way to generate earned income on the side and even form a full-time business out of it. Before you eagerly pull out your wallet to purchase an expensive seminar on the topic, let us tell you what house flipping is and what it involves on your part. To put it simply, house flipping is the process of purchasing a home with the intent of making a profit by reselling it at a higher price. It sounds like an easy process until you have to factor in numerous variables that can make or break your success. Before we go any further, remember that house flipping can be perceived by some as another way of making a gamble. You are taking in a temporary debt in the hopes that the payoff will exceed the debt and provide you with a nice profit at the end of the sell. This puts you at the mercy of the real estate market and the customers that might be interested in your home.
You might think that it is sufficient to simply buy a home in a nice area but this is where you are dead wrong! Not unlike the stock market, the real estate market can be in a state of growth (bullish) or decline (bearish). However, you need to remember that the real estate market is far less volatile than the stock market. A stock can change in a day, while a certain area may take years before the direction changes. Successful house flippers are those that can identify when the market is shifting to a bullish outlook and fully capitalize on it until the market eventually changes direction.
There are also factors regarding the home that come into play with house flipping. The first thought on an individual’s mind is to take a less valuable property and renovate into something that has a higher value. It sounds like fun until you sit down and calculate the time and money it will take to renovate the house.
Have you done any renovations yourself? Do you have the money needed to purchase the materials? Can you afford to have a professional fix the house for you?
This article was not written to dissuade you from house flipping, rather to get you to consider what it takes to flip houses should you choose to pursue it.
What advice would you give to people who are interested in house flipping for the first time? Share your thoughts on social!
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