Possible Pitfalls When Flipping a Home
By Angela Sanders Tuesday, August 27, 2013, 03:29 AM EDT
Have you seen those car commercials where a driver is doing insane stunts with the latest sports vehicle, and the lawyers make them use the disclaimer, "professional driver on closed course. Do not attempt this at home"? House flipping TV shows should have a similar disclaimer, "professional flipper backed by millions of network dollars. Do not attempt this on your own."
It's not that ordinary people can't make money on flipping houses, because they can. But too often they think it's as easy as it looks on TV, and many investors have lost their life savings on rookie mistakes. Don't be the sob story. Know the pitfalls before investing, so you can be a house flipping success.
Do You Have the Funds to Flip the House?
House flipping produces a profit when you sell the house. All the months (or more) you spend looking for the property, negotiating the purchase, renovating the home, and trying to resell it you'll be spending money, not earning it. If you can't afford to be out of tens of thousands of dollars for more than a year, house flipping isn't for you. Once you've flipped a few homes, it's easy to bankroll the next flip. But not many folks can afford it starting out.
In addition to the cost of the home, vacant house insurance, workman's comp insurance, and repair costs, you'll also need to consider hiring exterminators, getting the house inspected, building permits, taxes, and other costs. These add up quickly if you're not prepared for them.
Do You Have the Time to Flip the House?
Most successful house flippers do this as a full-time job. If you're working another job, it's hard to spend the time you need to on researching the property, finding out if houses in that neighborhood are selling well, negotiating with sellers, completing renovations, meeting with inspectors, and meeting with prospective buyers when it's time to sell.
Some house flippers underestimate how long it takes to complete repairs, how long you have to wait for the county building inspector to sign off on the project, and how long it takes to find a qualified buyer and sell the home. Unless you can take this much time away from your job, family, and other responsibilities, house flipping is going to be a problem for you.
Do You Have the Skills to Flip the House?
Having a knack for hanging sheet rock and building cabinets isn't enough to cut it when you're flipping a house. Most of the houses suitable for making a profit upon flip have serious problems that must be addressed to meet code. Skilled flippers need to be able to identify structural problems, electrical problems, plumbing problems, and other such issues and either have the skills to fix these problems or have a team of contractors on hand to help.
Before you tackle house flipping, talk to your family, your employer, and other people the decision will impact. If they're not willing to help you out, or at least forgive your frequent and ongoing absences and financial issues, you might not want to consider flipping houses. However, for those who can afford it and have the time and skills to do it right, a lot of money is out there for the taking. Just know what you're facing before diving in.