House Flipping: The Good, The Bad & The Ugly

We’ve all watched the shows on television and, chances are very good we’ve turned to our spouses or friends and asked the same question: “Why can’t we do that”?

Yes, even when the unexpected occurs during these house flipping reality shows it seems the homeowner always comes out not only unscathed, but turning a pretty impressive profit. Can it be done? Yes! Is there money to be gained in flipping a home? Sure! Are there any negatives involved in house flipping? Absolutely!

The Good Things About Flipping A House

Let’s start with the benefits associated with house flipping—after all, that’s why you’re reading this blog, right?

You Can Make Some Serious Money

No doubt about it, there is money to made in the house flipping business. The industry has evolved from a subculture of seasoned investors seeking a quick return on their investments to weekend warriors looking to turn a profit. Distressed, stigmatized and foreclosed homes are out there just waiting to be revitalized.

A Fun, Rewarding, Educational Goal

If you’re the type of person who loves a challenge, working toward a vision while learning a new skill, flipping a home can be an incredibly rewarding experience. You will learn how to properly search home listings to find that incredible deal, build a network of experienced agents and lenders as well as getting to know skilled contractors to help you reach your goal.

The Bad Things About Flipping A House

The old adage “if it’s too good to be true it probably is” holds some truth regardless of the topic, so yes; there are some negative things you must consider before flipping a house.

House Flipping Can Cost More Than You Think

So you purchased a home, hired the contractors (or decided to perform the renovations yourself), and you’re ready to sell that house! That’s great, but you must understand all of the above doesn’t simply mean your property is going to sell. With proper marketing, accurate pricing and the dedication of a skilled sales agent you will sell your property quicker than the FSBO route, but you have to be prepared to carry the PITI (principal, interest, taxes and insurance) until you find a qualified buyer. The longer the house is on the market, the more cash will need to come out of your pocket, cutting into your potential profits.

Selling A House On Your Own Can Be Stressful

Attempting to quickly flip a house can be very time consuming, burdensome and stressful—especially if it’s your first time. It’s important to go into the project with the knowledge that you’re not going to have much leisure time, especially during the renovation process. If you intend to sell the home by yourself when all the work is complete you must also plan for the sleepless nights that may be in your future wondering when the ideal buyer will schedule a walk through.

The Ugly Things About Flipping A House

We understand ugly is a really harsh adjective, but ask any house flipper about their negative experiences and chances are they will have even more descriptive phrases to use!

Unreliable Contractors Can Cripple Your House Flipping Plans

Short of finding an amazing house at an incredible price, the next most important factor to consider is the quality and reliability of the contractors who will perform the required renovations. It’s advisable that you not only quote the work out to several trades, but also perform detailed homework regarding their past jobs. Nothing can eat into your profit more than shoddy craftsmanship and wasted time than an undependable construction team—except maybe the following topic…

Capital Gains Tax Can Devastate Your Profits

If you’re not familiar with what many house flippers feel is their biggest enemy, you really need to do some homework! The Capital Gains Tax is charged to investors when they have sold an asset, in this case a home, for higher than the purchase price. Check with your financial advisor and real estate agent before investing in a home you intend to flip.

If you decide house flipping is something you would like to investigate further, please feel free to contact us at 301.745.1500! We will be happy to schedule a meeting with one of our talented agents who will be able to answer your questions and give you candid, personal information.

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