Introduction to House Flipping
People have been talking about house flipping for years. Since the 2008 housing crash, people all over the country have cashed into a new form of income. One could partially attribute the rise of housing prices over the last several years to house flipping. You see, house flippers help the neighborhood by improving the housing market. If you own a house, you do not want an abandoned house falling apart down the street from you. Wouldn’t you, as a homeowner, want somebody to come into the neighborhood and fix that house? Heck yea, who wouldn’t. On this page, we will discuss the advantages and disadvantages of flipping houses, if you want to skip ahead, check out our article on how to flip houses here.
There are several factors that need to be considered before considering house flipping as an income source. These factors include how much money you have in the bank, which areas you want to flip houses in, and how much work will need to go into each home.
Advantages of Flipping Houses
-One of the biggest obvious advantages to flipping houses is financial freedom. Want to get out of that 9-5 lifestyle? Flipping houses is a perfect avenue to explore a new lifestyle, one that is free of the normal rat race.
-House flipping can generate tremendous wealth if done properly.
-Help out and improve communities by getting rid of abandoned homes.
-Take charge and build a consistent revenue stream. You do not have to sell flipped houses, you can rent them out for a good profit.
Disadvantages of House Flipping
-Starting out flipping houses can be rough, you should be prepared to sit on a house for months, even up to a year.
-Unless you are completing the work on your own, you will need to take charge of local contractors in order to complete work. This can be a daunting task.
-Like any other business, flipping houses can throw you curveballs. You might run into unexpected problems after starting work on a house, which can cost money.
Financial considerations of house flipping
If you got this far, that means you are still interested in the potentially lucrative house flipping market. Great! But before you get started, there are income considerations to keep in mind. If you do not have over $100,000 in the bank, it is probably best to start flipping houses part time while continuing your day job. Why is this important? If things do not go to plan, you will become very discouraged and may even end up in financial trouble if you get in a bind. One of the main benefits to flipping houses is the financial freedom that comes with it. Don’t get ahead of yourself, start slow, and once you finish your first project, then consider quitting that job!
Finding the market to purchase the home
Well, that comes with any real estate investment. Before you make plans, you need to focus on an area. What is the market in the area like? How much are houses going for? How many houses are currently on the market. Remember, it is important to consider your bottom line when flipping houses. If the market in the area is on fire, it means once your project is complete, you should be able to sell that house very quickly. Also, are you going to rent the house when the flipping project is done, or sell it? If you plan on renting it out, you may want to consider a market that is cold, and has a good rental market. In Detroit, MI, for instance you can purchase a house for less than $1,000.
Zero in on the project cost
As you are not an expert (yet) on flipping, you before making an investment purchase, you need to know what the total project cost will be. You may think that run down house in Detroit going for only $1,000 will be a good deal, but that may not be the case. Find a local contractor and a home inspector that you can make a good relationship with. These people can save you from making a very bad investment! Before making the purchase, bring the contractor and home inspector in to assess the condition of the house. You will need estimates from the contractor, and the home inspector will confirm the structural integrity of the home. Never eyeball the house and make an offer! It may look like the home only needs a fresh coat of paint, but it could have severe structural damage that could put you in the red of the project.