House flipping is the process of buying a property at below market price, fixing it, and then selling it out for a good profit. The process of house flipping requires a large amount of money and putting in a lot of effort of house searching, buying, fixing the house and resell it later. But, in the principle of house flipping, other than buy low, sell high, time is money too. The one more day you keep the house, the more profit you lose; The faster a flipper flips a house, the better profits he makes. Hence, every house investors tries their hard best to sell it in the shortest possible time and for highest possible price.
Besides of that, house flippers need to be prepared for the possibility that the house can’t sell immediately. They also have to make tough decisions, like if the deal less than they expected, but still earn a profit, but not a lot.
In today, we will discuss the pros and cons of house flipping. If you are the beginner who want to try out this investment strategy for your first investment property, this is the article you must look out.
The Pros of house flipping
➊ Get the return instantly
Compare to buy and hold or renting strategy, this investment strategy leads much more faster returns. This can makes you earn a one-time profit as soon as the house is sold out.
➋ You can save more time and money
Since the house flipping is buy, fix and resale, the whole process can be done as soon as possible. It can also enhance an investor’s confidence and give some experiencse for putting funds into a couple of buy and hold properties.
➌ Fewer hassles
Since you don’t have to deal with the tenants, you will get the fewer hassles from property investing. Besides, as most flips deal begin with the distressed properties, the initial investment cost is usually lower than the market rate
➍ Less risk
Compare to buy and hold, house flipping is consider as a lower-risk investment strategy and can offer a better return on investment (ROI). The lower risk stems from the fact that long-term property market fluctuations wouldn’t affect a property that is being flipped quickly.
The Cons of house flipping
➊ Tax issues
Since this is short-term investments, house flipping comes with its own set of tax implications. Therefore, before you get excited about the profits you will make, you will need to consider about the real property gains tax that you need to pay.
➋ High costs
Yes, you can buy a property at below market price. But, don’t underestimate its remodeling/ renovation costs and repair costs. If you din’t prepare a large amount of money for this, your house won’t sell at the high price. Besides, this investment strategy come with higher interest rates. Many flippers forget that even this type of investment strategy can get you stuck, with your cash trapped. Hence, it is advisable to save enough money before enter the market.
➌ Out of your expectations
This is no wrong that house flipping can generate profits in the shortest period of time, but, it doesn’t always happen. Because this can be difficult to find a good properties for fix and flip. Most investors end up fail to earn profit from this investment strategy because they’re not educate enough, unrealistic expectations and enter into this market so fast with not enough funds.
➍ Newbie problems
House flipping isn’t suitable for everyone, and it takes time to train their experience before you become expert of it. Its not about buying some books and attend the few seminars can make you an expert level flipping pro, you need to get a mentor, study the market, make out a perfect investment plan, enhance your negotiation skills and put those into reality practice. The more you practice, the more experiences you gain, the more chances to successful.
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