Pros and Cons of Flipping a Home

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Flipping rundown homes and selling them for a profit has become a popular investment strategy. However, the road to fix and flip riches isn’t quite as easy as it seems. This investment can be risky, and while it comes with great rewards, it’s also rife with challenges. Consider the benefits and disadvantages of this type of investment before dipping your toe into the home rehabbing waters.

The Pros of Flipping Houses

Fix and flip ventures wouldn’t be as popular as they are if there weren’t numerous benefits. These are some of the pros of this endeavor:

Quick Profit Opportunity: The potential for profit is large and these profits can come quickly. Because property flips are done quickly, you could find yourself pulling in a great deal of money within a year’s time. Unlike stocks and other real estate investments that can take years to show gains, fix and flip ventures can quickly provide great returns-so long as the flip goes smoothly and the market is hot.

Flexibility: If you’re looking for a career move that provides flexibility, house flipping is a good fit. You become your own boss, and maintain a significant degree of control over the process, from start to finish. While you’ll need to give up some of this control if you hire professionals, you’ll find that much of the decision making power remains on your shoulders. For some personality types, this can be an enticing facet of the process.

Getting Active: Many flippers find they enjoy the physical labor portion of the process. While most of America’s workforce spends upwards of eight hours a day behind a computer screen, flipping properties means working with your hands and building tangible results. Some find this type of work much more rewarding in the short and long term. If you’ve always enjoyed getting to work with your hands and revving up those power tools, house flipping could be the right fit for you. Note of caution: if you’ve never done heavy physical labor like this before, prepare for aches and pains.

The Cons of Flipping Houses

If a house flip goes smoothly, the benefits are vast. If there are too many hiccups along the way, the repercussions can be long-lasting. The risks and drawbacks of a house flip are enough to give any investor pause.

It’s Expensive

During your first house flip, you’ll find costs add up much quicker than you might have expected. Let’s not mince words: house flipping is extremely expensive. If you don’t have your own capital to work with, you’ll need to examine the ways you can finance your venture-you’ll end up shelling out a lot more than you’d planned. For some, it could mean approaching hard money lenders for short-term loans at higher interest rates. Others pursue angel investing or take on a partner with capital to spare. Most of these options will see you paying more for your loan in the long run, but in many cases it’s a necessary evil.

You’ll Need to Hire Outside Help

If you’re not a skilled contractor with years of experience, you’ll likely need to hire outside help. This can cut into your profits, as much of the money made from flipping houses is made possible through DIY efforts. However, you can’t forgo expert advice if you’re not well-versed in the ins and outs of demolition, piping, electrical, and all the other facets that come along with intense renovations. When hiring contractors, it’s important to interview numerous candidates and find the contractor that fits your budget and is willing and able to work towards your vision.

Flipping houses can provide you with plenty of profits, but it can also prove to be a money suck that’s more stress than it’s worth. If you’re looking to get into the real estate market, be sure that you’re prepared for all facets of fix and flip ventures before getting started.

Melissa Thompson writes about a wide range of topics, always revealing interesting things we didn’t know before. She is a freelance producer for USA Today, and a contributor at Technorati. She lives in Utah with her 2 kids and husband. Melissa Thompson can be reached via LinkedIn or Twitter @melthompson88. Please follow and friend her on either site.