Flipping houses seems like it would be a fun and potentially rewarding career, with HGTV glamorizing the idea of flipping homes with all of its popular television shows, such as “Fixer Upper.” However, if you don’t have the necessary skills, licenses, or cash to invest at the start, this pursuit may not be the best idea for you.
Be sure to do some research, considering the qualities a successful house flipper should have before you jump into this exciting endeavor. If you aren’t really familiar with the homebuying process, you’ll want to first review the steps of how to buy a house. You’ll find out more about all the costs associated with that big purchase, including the inspection, the listing process and how to avoid fees as well as how to best be prepared for what might lie ahead and why it’s so important to avoid taking out loans.
In the meantime, ask yourself these questions to determine if you should proceed further.
Are you a realtor or licensed contractor?
A house flipper is usually a professional realtor or a licensed contractor too. If you can be your own realtor, you’ll likely be able to avoid at least some of the potentially high costs associated with purchasing and selling a home. At least a portion of the commission is just one of those costs, and you’ll also be able to host an open house when it’s time to sell and take care of many of the other things that come with the process. If you are a contractor, you can do the work to update the home and avoid paying another contractor to do it for you. Either one of these professions is sure to help you gain the largest possible profits on the property you plan to flip.
Do you have the cash to invest?
Obviously, cash is a big factor. If you don’t have the cash and need to take out a loan, you could end up getting less out of your investment than you put in. If you plan to flip a home, you really must have the cash both to buy it and to fix it up. If you take out a loan to purchase the property, you will pay higher closing costs, which can be up to six percent of the sale price. You’ll also have to pay interest on the loan while you’re fixing it up and while it sits on the market. Both of these costs will dramatically cut into any potential profit.
How comfortable are you with risk?
The real estate market can be a risky business. If you’re used to a lifestyle with consistent and reliable paychecks, you must seriously ask yourself if you would really be comfortable living a lifestyle where money will come and go, and your investments aren’t always secure. Experts typically recommend that you have considerable savings to help get you by in between sales and when the market is slow.