About House Flipping

Introduction to House Flipping

The opportunity of making a quick buck always attracts new inexperienced investors into the real estate market. Do not forget that buying a distressed or simply undervalued real estate property as a short-term investment has it’s own set of risks. And there is a huge difference between so called buyer’s and seller’s market. In the first case, you will have plenty of undervalued properties to choose from but hard time to resell it. In the latter, finding good value gets increasingly hard but once you even improve it with some remodeling or staging, it usually should be easy to get rid of it with profit.

Financing for Flipping a House

Getting funding for real estate flips is one of the major problems in this line of business. Houses are expensive, right? Some people go into flipping only after they amassed a sizable cash reserves and they are looking for the opportunity to grow them. This is the better version but they still should be cautious before making any purchase. However, most folks utilize mortgage or other type of loan for their real estate investments. This brings whole net set of risks into the play as we will mention in the next paragraph.

3 Most Dangerous Mistakes House Flipper Can Do

1) Overstretching one’s finances – Many people plan only for the scenario in which everything goes according to their plan. And the plan was to buy it on mortgage and use the rest for upgrading the kitchen countertops, dump it back to market, and resell in less than 3 months. But what if the market changes? Or what if you simply overestimate the value of the house? You can either go down with the price, cutting into your potential profits or maybe even into own money. Or you have to wait and keep paying interest. Always try to imagine the worst case scenario and prepare for it.

2) Getting into wrong market – Maybe you love that particular area of town, or duplexes, or small rental units. But are they hot right now? Do local people share your enthusiasm about this type of real estate. Often things are cheap for a reason. Do your homework and talk with locals, check zoning laws, ask yourself why is the seller willing to get rid of this property if it is such a good investment? Do you really know something that he does not or is it the other way round? Which brings us to the third mistake.

3) Overestimating own abilities and knowledge – Being smart was divided very justly among people. Nobody complains that he is the fool. Human beings are wired to think about themselves as the cleverest of the bunch. Are you really the right person for house flipping? Do you posses the expertise? Are you good at selling stuff? Are you OK with taking big financial risks? Do not try investing into real estate just because you are attracted to potential for big profit. Just be honest with yourself.

Disclaimer: Author isn’t certified financial adviser and the material on this website are provided for information purpose only. Investment of any kind includes significant risks. Author of this website is not responsible for readers’ investment decisions.