If you are a realtor or aspiring to be one, house flipping must be attracting you towards it. Many of us get into this business only due to high and quick profits associated with house flipping. Flipping a house is actually buying a cheaper one and spending money and effort on its improvement and renovation to sell it after a short time period. In this way, realtors make money on a higher profit rate as compared to simply selling your property after years of possession. But it may not always be as simple to buy and flip with an appreciable profit. Any wrong decision or inefficient managerial move can turn a flip into flop deal. It may cost you all your assets if your plan of flipping a house goes wrong.
There are certain things which you should think about before making a decision to start your first investment in house flipping. Firstly you should account for your business move as “if it is for me or not?” consider your assets and money you have and the loss which you can bear in case of a flopped flip of property. If you are a starter in this field, it may be more risky for you to try flipping properties in the first place because you don’t have enough experience in real estate. There are some pros and cons related to buying a property for flipping presented as under:
Pros
Instant Profit
The most attractive thing related to the business of flipping properties is the instant and high amount of expected profit. If your investment goes right, you can earn a lot of money by continuing to flip the houses after a shorter time period. Your knowledge and experience about property dealing will pay you the most in flipping your properties.
Market Knowledge
By doing multiple flips in a row will surely give you extensive knowledge about the market of properties. Which place and what kind of property is in competition and how to invest in the right direction are all the answers you will find in this flipping experience. You will come across the Best Utah Real Estate companies while frequently selling and buying properties. You can also learn from their success stories.
Customer Insight
This will allow you to know what people are looking for and where most of them want to live and invest in. With this knowledge, you will be wiser in spending your earnings to double them up. When you know what are the preferences of homebuyers in view of property architecture, themes of interior design and location of the house, you can be a better home staging professional and effective home improvement expert to make money from each penny spent on the property to increase its value.
Budgeting Experience
The house flipping experience is good for you to have an idea of all known and unknown or unexpected expenses which can incur during buying, constructing, improving and selling your property. This will benefit you in the future to be more strategic in your business plans and decisions.
Cons
Loss of Money
The riskiest incident that can happen during a flip project is the loss of money in the form of unexpected investments in renovation, dealing with contractors, construction delays and material delivery delays. If your investments go bigger than expected, it will consume your expected profits. You may break your budget by wrongly anticipating the expected price of the house on which you will sell your property. Any delayed and less interested homebuyers can reduce the amount of profit to a considerable limit. You should expect a loss instead of profit as well.
Holding Expenditures
If you buy a house and plan to sell it in a short time period but do not find buyers as soon as expected, not only the value of the property will decrease but also you will have to pay property taxes, utility expenses and maintenance costs like taking care of gardening and grass cutting, etc.
Unexpected Breaking of Budget
You may not have included the expenses of renovation and staging the house before putting it on sale while planning to make a flip of house. Think of rewiring, reinstalling the windows, or adding luxury objects to raise the values of the property. These tasks may combine into a really big amount of money to eat your savings.
Increased Taxes
The investment in increasing the value of the house may also increase the taxes on your property with an enhanced property value. These taxes will continue to make a hole into your pocket until sold to someone else. The increased taxes may also lead to a loosened interest of the buyers in your house.
Delayed Selling
You may be expecting to sell your house just after the completion of improvement projects and put it on sale instantly after it. But, it may not always go in a way you anticipated. It may get hard to find a buyer for your house and a delayed sale is surely not a good impact on the worth of your property.
