One potential path to home ownership is the concept of flipping a home. The idea of flipping houses – buying one, putting some work into it, and then selling it for a profit – was very much a trend that never went away.
If you are new to the whole idea of property ownership and think that flipping can be the fast track to riches, think again. It can be a moneymaker no doubt, but can also be a big time sink. A project like this requires a lot of hours, and if the house you are flipping is your main residence while you do the work, you’re adding even more of a challenge to the equation.
With experience, house renovation and flipping can go well and be profitable if you know what you are doing and have appropriate DIY skills. If you’re lacking the skills, you will have to pay others to do the work which will cut your profits down.
If your skill set is carpentry and building, you may be able to take on a project of this type. But flipping involves a lot of sweat equity, not like the fun portrayed on reality TV shows and it’s also definitely not just pure profit.
Getting started flipping houses
There are many ways to make money in real estate. The “buy-and-hold” approach is simply investing in rental properties and is one common tactic. There are many successful investors who started buying rentals, then moved to flipping houses. For the uninitiated, this simply means buying a distressed property, fixing it up and reselling for a profit.
Both approaches have their pros and cons; investors who have only rental properties often have mortgage payments. But in order to buy properties outright, you need cash! Ideally, flipping houses will produce the cash to reinvest into more real estate.
If you are seriously considering getting into real estate investing, one way to produce the extra cash is by buying a fixer-upper, living in it and doing the work yourself and then selling for a profit. The profit would than give you the cash boost to invest in your first rehabber.
If carpentry and home building make up your skill set, you may be able to take on a project of this type.
Another approach is the hands-off rehabber. Are you too busy to manage the construction process yourself? You can always hire a general contractor (GC) to oversee the painter, plumber, electrician and carpenter.
Like hiring any professional, you will need to find general contractors through trade publications, estate agents and recommendations from other investors. By getting at least three written bids, you’ll be able to estimate your budget for the project.
Even the work for a cosmetic rehab can include new kitchen cabinets, counters and appliances, new flooring, remodeled bathrooms, paint throughout, and new fixtures. Then there are the drywall and carpentry repairs.
Fortune favors the brave
Make no mistake; flipping your first house is not an easy decision unless you have nerves of steel. The sheer amount of money involved, and effectively acting as a construction manager is daunting. Then when the project is completed, the property has to be marketed and sold.
Where complications arise is when the property is in an unfamiliar area or needing more repairs than first seen. Paying too much for a house initially is problematic as is overestimating the resale value.
Some you win, some you lose
Flipping houses is a great way to invest in real estate but it’s very important that you go into it with open eyes. It’s a risky business that can be extremely profitable, and education is the key.
There’ll be some good successes, some so-so outcomes, and maybe even a bad deal or two. Seasoned flippers all say that the “bad” deals have taught them as much – if not more – than the good ones.
Given that education is the most critical part of real estate investing, hands-on experience is the best kind.