Flipping houses is when someone purchases a property, holds on to it for a while, usually to make improvements or repairs and then sells the home in hopes of making a profit. It might look like a lot of fun, but it is a lot of work. Here’s a quick guide of what you should know if you plan to start flipping houses.
Pros and Cons
Profit. One of the biggest advantages of flipping houses is the possibility of profit. Because flipping houses is one of the easier ways to get into real estate, it’s a great side hustle or a segue into a new career if that’s what you want. It also improves the value of the neighborhood you’re flipping in.
On the other hand, flipping houses comes as a huge financial risk. You could possibly lose money on a flip, the property may not sell quickly or you can run into legal problems. All of these things take a huge toll on your mental, physical and emotional health. Flipping houses is known to be exhausting. Be cautious and ease your way into the process.
Banks offer home equity loans, home equity lines of credits, and even personal loans to help jump start your real estate career. Hard money loans from an alternative lending institution are also an option to consider. Most investors finance their first project with the intention to make enough money to build a cash reserve for future projects.
Set a budget. Not having enough money is the biggest obstacle to flipping houses so set a realistic budget and only view properties well within that price range so there is enough for improvements. Most people recommend two budgets, one for the purchase price and another for renovations along with a cash reserve for contingencies.
Thinking it is going to be easy is one of the biggest mistakes people make getting into this industry. Don’t underestimate the work. Consult with professionals, vet your contractors and take it one project at a time.
For more tips and information on flipping houses, contact Northgate Capital Finance today.