RealtyBizNews - Real Estate Marketing and Beyond
Real Estate Marketing & Beyond
Home » Real Estate Investing » House Flipping » Why Flipping Houses is a Bad Idea if You Don’t Consider These Common Risks.

Why Flipping Houses is a Bad Idea if You Don’t Consider These Common Risks.

By Dean Signori | March 18, 2019

House flipping seems like all the rage at the moment, particularly because their appears to be, from an outsiders point of view, plenty of money to be made. Which is actually true...on paper.

Perhaps because of the dollars signs in our very own eyes, we forget to look at the negatives of that can come with such a high risk, high reward business model.

We think this is why no one is talking about exactly why flipping houses is a bad idea and the risks that can come with it.

Here are some key points that we’re going to discuss to backup this thought;

  • House flipping definition, so you can better understand what we are talking about
  • The risks of flipping houses in today's market
  • And the solutions to these common beginners mistakes.

Feel free to skip ahead to the part of the article you’re most interested in but if you’re here to see the negatives behind flipping houses and how you can overcome them, then we suggest going through the entire thing so you can properly form your own opinion and decide whether the positives outway the negatives.

House Flipping Definition

It would be pretty handy if we all knew what this article was about, so first you’re going to need to know what house flipping is.

House flipping is essentially buying houses and at a significantly low price and selling them high, typically buying them in a falling market and selling them at the peak.

Flipping, which is another term for flipping houses, can also be accomplished by buying a fixer upper homes, renovating it and selling it back to the market for someone to immediately live in upon purchase.  This being one of the more appealing ways of going about things, since its mostly in your control unlike straight buying and selling which takes the housing market into account.

Risks of Flipping Houses

Now you know the definition of house flipping, it's time to get into the real meat of this article, so then, what are the dangers of flipping houses? And what are some solutions to help avoid these dangers?

Forever fluctuating market,

Like I’ve previously stated in, flipping houses and the profits you make are mostly determined by the housing market, which in most cases is somewhat unpredictable. Is it currently booming upon purchase? Should you wait for it to drop before buying the property? What if it rises and you can never get it at such a good price again? These are all the questions that keep house flippers up at night, and rightly so.

Solution: Check your local real estate agent for market updates and in addition you’ll want to know the year to year trends within your area so you can predict when the market will be at its highest and lowest.

Shift in Demographic,

Is the area your buying in growing, stable or even declining? Determining how popular a specific region is will let you in on how aggressive you should be on pricing, get this wrong and it could cost you some serious money that could be used elsewhere.

Solution: There are resources online for you to find out this information, check local real estate sites to see if new buildings are on the rise or if there is a current trend with people selling their property in the area.

Wrong tools for the job,

Starting out, you’ll want to do things yourself, so you can get an idea of the process so when you start to hire others to help with the renovation work, you’ll know what the job takes, allow you to better judge their work.

There is a major problem if you’re starting from nothing, you will mostly likely lack the proper tools for the job, which will take a hit at your costs, your time and probably how frustrated and annoyed you’re going to get with your new equipment.

Solution: It’s vital you are able to find the best equipment without wasting time and spending unnecessary cash. Thankfully, Best Spy offers plenty of DIY related reviews that will help you find just what you need for your latest house flipping renovation project.

Lack of experience,

Depending on your background, flipping houses can be a scary venture to make, especially if you’re lacking the experience most already have when entering the field. Not to mention the fact that house flipping is a gamble and an expensive gamble at that, certainly one you don't want to get wrong due to lack of experience.

Solution: Beyond the obvious ‘just gain more experience’ solution, it will be handy to contact a familiar face such as a friend to help you with your first project so you can get a feel of what flipping houses takes.

Not enough time,

At first though, this may seem like a risk that can be preventable for beginners and long time house flippers, which it can be. But sometimes, life just gets in the way, whether we want it to or not.

Because of this, you could buy a property and be stuck with it for several months before you truly get the ball running, by that time the house market could have plummeted and you’re now left with a property you’ve lost.

Solution: Managing your time is key, even if things get in your way, whether thats family time or your regular job, you’ll want to commit setting some time aside for you to get on with renovations.

Unknown or Hidden repairs,

Everyones house has them, even the one you’re in right now whilst you read this article. You’ll mostly discover them if you’re renovating, whether that means knocking a wall down to give a more open plan kitchen or covering unsightly boiler pipes this new space now reveals problems you couldn't have known about.

Solution: There is no way to avoid this, except take into account your budget, whatever your repair budget is (and you totally should have one) make sure to stick around about 15% on top of that just in case you’re underestimating. And if you don’t spend it, that just means more profit for you!

Final Thoughts

Flipping houses certainly isn't for everyone and is more than certainly not for those of the faint of hearted. There will be some restless nights and possibly some tears and with no doubt some elbow grease will be expended...but it's not all bad.

If you manage to avoid all of the danger to flipping, you will more than certainly reap the benefits of such an exciting real estate business model.

"Dean Signori leads the team at Homes Direct 365, a luxury furniture company based in the UK. With over 10,000 products growing daily ranging from antique French style, mirrored & shabby chic furniture. Advising property owners and real estate brokers on interior design and home staging."
Latest posts by Dean Signori (see all)
  • Sign up to Realty Biz Buzz
    Get Digital Marketing Training
    right to your inbox
    All Contents © Copyright RealtyBizNews · All Rights Reserved. 2016-2024
    Website Designed by Swaydesign.
    linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram