The Fatal Flaw in Flipping Houses
The idea of flipping houses has become a phenomenon in this country. It’s quite astonishing how many would be handymen and women have secret dreams of getting their hands dirty playing with power tools and turning the most rundown house in any given neighborhood and turning it into the diamond they feel it could be. Unfortunately many of these would be ‘flippers’ have no real clue of the task they are considering.
First of all, it is quite possible to make a very good amount of money by rehabbing properties with the intention of selling quickly. The problem with this is that most people who attempt this make one of two fatal mistakes (fatal for the maximum profit potential that they are tossing out the window).
The first fatal mistake they make is that they become emotionally invested in the home they are rehabbing and rather than doing a few simple cosmetic changes and turning the property quickly, the end up doing major renovations, investing a lot of time and money (when flipping properties, time is money, the longer you are working on the home, the more mortgage payments you have to make, the less money you walk away from the close with).
You have to remember that the property you are flipping is an investment and you want to get in, do the work, and sell the house. You don’t have to turn it into a luxury home or even a home that you would want to live in. In fact, you wouldn’t want to do that in certain neighborhoods because you would never recover your investment.
The second thing you must remember when flipping properties is don’t get greedy. Just because you think you could make more money if you added the granite countertops doesn’t mean you can. I’m not suggesting you take shortcuts or do anything that is structurally unsound, but I think you will be amazed at how much less it would cost to resurface an existing bathtub than to replace it.
Want to change the look of a room dramatically without investing a great deal of money? Grab a paintbrush. Changing the color of a room can have a dramatic effect on the overall look of a room. Rather than buying new cabinets for the kitchen and bath, try cleaning the original cabinets and adding new cabinet facings–these are little things that can make a profound difference in the market price of a house. For curb appeal hang ferns on the front porch (if it has one or invest in a little landscaping—just don’t go overboard). Don’t decide that you need 30,000 for a month’s work rather than the 12,000 you were originally hoping for and spend 25,000 to make the 30,000. It becomes a catch 22 when greed kicks in. So don’t get greedy.
Flipping houses is by far one of the quickest ways to amass a serious profit in real estate investing, especially if you can do the work yourself. Just remember to set a budget from the beginning and stick to it. Make a list and don’t deviate for cosmetic reasons (serious problems do occasionally occur and they must be dealt with safely). Don’t get greedy and have fun with it. It’s a learning process and the first experience can be frightening and exhilarating at the same time.
