House Flipping - Is It Still Possible To Make Money?
Just five or six years ago, in most places the term 'house flipping' was known only to a select group of investors. With the advent of the skyrocketing real estate values of the past few years, and a spate of television shows dedicated to chronicling the trials and tribulations of house flippers, it seems that now just about everyone knows what house flipping is.
However, those ever-upward trending home prices are just a fond memory in most parts of the country as I write this. Before the boom market ended, you really had to screw up to lose money on a house flip. You could buy just about anything (within reason) at any reasonable price, and make a heck of a lot of mistakes while completing the flip, and still come out of it with your pocketbook smelling like a rose at the end.
But now things are quite different. Lots of people who took advantage of the easy money are getting out of the flipping game. Those who remain all agree that it's vital to do your homework when picking the house you intend to flip. As a matter of fact, experienced flippers are fond of saying that you make your money when you buy, not when you sell. So if you pay too much, or buy a house in the wrong area, it doesn't matter how nicely you remodel it - you may have doomed yourself to a money-losing deal before ever picking up a hammer (or paying someone else to do it).
And it's not necessary to err so badly that nobody ever wants to buy your flip in order to lose money. All it may take is three or four months of carrying the mortgage after renovation is done to insure that after subtracting all your expenses, you didn't make a dime, or worst, have a negative return. There are a lot of expenses associated with flipping that many people never think of. It's not just buying materials (if you're handy) or paying contractors (if you're not). There are myriad other items that need to be accounted for when you're planning your budget. Things like inspections, appraisals, closing costs, property taxes, insurance, realtors fees, and staging the finished house are all necessities that tend to get overlooked by prospective first-time flippers. Which is not to say that you should give up your dream of being the next house flipping tycoon. You just need to go into it with a realistic attitude. Realize the days of easy money are at least temporarily gone, use due diligence when considering any prospective flip, and be realistic when considering which renovations will give you the most return on your investment. There are a number of good books on the subject now available. Get hold of a few, do your research, realize that it's probably going to be a lot of hard work, and maybe someday you'll be the star of a new TV house flipping show!
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