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Editor’s Note: This is a Guest Article from Kathleen Macky
If you listen to media pundits, it seems like flipping houses is always either on the rise or on the decline. The truth is, a savvy buyer with a smart plan can pretty much ensure turnaround over time. Although the lending crisis and a weak economy has certainly put a crunch on the buying and selling of homes, a person with a little time and money on their hands still stands to make some profit through flipping.
First and foremost, you need to understand how flipping works. It generally includes buying a house, fixing it up quickly, and reselling as soon as possible (ideally before the first mortgage payment is due) for a profit. Most people who are just starting out should either have some handyman skills (laying flooring, installing cabinets and counter tops, or even painting and swapping out lighting fixtures), have some friends willing to work for cheap, or know some reliable and cost-effective contractors. Over time, you’ll be able to pay to pass the labor on to someone else, but you should plan to be heavily involved in the upgrading process, at least in the beginning.
That said, you may be a bit worried about investing in what appears to be a fairly risky venture…as well you should be. Yes, this is a buyer’s market. You can currently find pretty outrageous deals on decent homes in nice areas.
Unfortunately, it is not a seller’s market, which means you may be hanging onto the property for awhile. So here’s the rub. You either need to wait for the market to improve before you begin your operation, or simply adjust your selling strategy. You should stay abreast of trends in sales. Which areas seem to have the quickest turnaround? Are homes or condos selling faster? Are families or individuals buying more? What price range seems to be enjoying the most sales? All of these are questions you should be asking yourself before you even start looking.You may also want to consider what you will do with a property if it doesn’t sell. How many months can you float it (making mortgage payments and losing money) before you have to default? Are you willing to lower your price and make less profit to guarantee a sale? What will you do if the property turns out to be a money pit? If you simply can’t unload, would you be willing to consider renting to cover costs? Assessing the possible risks and having a plan in place can not only reduce stress, it can save your business.Although flipping houses has its own unique challenges to contend with, you need to approach it like any other business proposition by educating yourself and creating a sound plan of attack. Those who are most prepared tend to be the most successful, so remember that you need to stay on top of market trends even as you continue to work and expand your business. In the fast paced world of flipping, you can’t afford to rest on your laurels, so don’t assume that a few good sales equal instant success. You stand to make a lot of money flipping, but you have to be smart, hard-working, and determined. Otherwise, you’ll end up in the same boat as the previous owners; with a foreclosure sign on the lawn.
Kathleen Macky owns a real estate website where you can browse Wesley Chapel homes for sale.
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