Television shows and infomercials of all styles would have you believe that flipping houses is a fun and fascinating way to make a huge profit in real estate. It is what it is, although it is also what it is. With the right professionals, there is a lot of money to be made by flipping homes (buying homes in various states of neglect or disrepair, repairing them, and then selling them for a substantial profit). However, there is actually a great deal of work involved in making that money.
The amount of work, time consuming, sleepless nights and days, and sometimes sickening chores that must be done to bring a dilapidated property into saleable condition are often glossed over in these TV shows for a number of reasons, most notably because the average person sitting at home wants to believe that he too can do this kind of work for a quick profit, and these images are not conducive to that fantasy. In other words, it’s a tough scam, no matter how easy they try to make it look.
Poor planning is the bane of the flipper’s existence. In order to successfully flip a property (and by that I mean maximum profit-minimum investment, not any profit), you must carefully develop a plan of action and implement that plan as quickly and inexpensively as possible. You must also recognize that there will likely be rain delays, hiccups and disasters along the way. Proper planning can eliminate some of the disasters that may occur, but it will not eliminate all possibilities that may arise. More importantly, however, proper planning can limit the occurrence of these events and the severity of their impact on the overall schedule and budget.
Another important thing that falls under proper planning is to conduct proper inspections. The importance of this step cannot be overemphasized. Knowing what problems and potential problems exist in the property can help you create a workable schedule and budget for the flip of the property. This will also inform you of potential problems that you may encounter during the process. Those week-to-week television shows often overlook this important step, and many investors find themselves investing in a money pit rather than a home with the potential for quick profits they would like.
You should make every effort to ensure that your first flip is a simple cosmetic flip (this is something a good inspector can assist with). In fact, this should be the case for your first few flips, and then you can move on to more substantial flips that involve more work. The reason is simple – while the profits will be smaller on these cosmetic flips, as an investor you have the opportunity to learn to budget, set a schedule, and live within those budgets and schedules. This is where most investors go astray when they take on projects that are beyond their means. Flipping a home is not a small endeavor, and when this particular real estate investment doesn’t work out, there is a lot of money lost. Start small, ignore the dollar signs in your eyes, and then move on to more projects.
Another mistake many investors make is not catering to the audience they hope to attract in the property being flipped. A single family apartment does not need 3 or 4 bedrooms. Meanwhile, a family home usually needs at least 3 or even 4 more bedrooms. Other considerations should be fencing in the yard, landscaping and maintenance requirements. Today, low-maintenance lawns are in high demand, especially those that appear to be well-landscaped.
Keep these things in mind when flipping real estate and you should see some level of success – just remember that it pays off when you do things you never thought you would in the process.