Infomercials make flipping houses to be simple and easy way to earn millions. Certainly, you can make good profits but to make it work you will need to be aware of many aspects.
Major house flip pitfalls you need to be familiar with and avoid
Not enough knowledge
High degree knowledge about local property market is a MUST to flip houses successfully. It is crucial to choose right home in right location and at accurate price. For example, in a $12K neighbourhood, never expect to buy at $9K and sell at $16K.
If you get a lifetime deal of cracking house in foreclosure then you need to be familiar with what kind of renovations are necessary and the ones to skip. San Antonio house buyers need to understand the applicable zoning and tax laws. In addition, when to cut losses and retreat before the project turns into a money pit.
Getting involved in real estate is expensive. First expense will be home acquisition cost. If the acquisition cost is being financed from legitimate vendor means you will need to pay interest, Fortunately, interest on home loans is tax deductible but not eligible for 100% deduction. Each dollar paid as interest adds to amount needed to earn on resale just to get by.
Alternatively, paying cash eliminates interest cost but there will be other expenses like taxes and utilities. In addition, renovation and repair cost needs to be added. The sale price needs to be more than total of acquisition, holding, and renovation costs. You can manage to surpass these obstructions but remember capital gain taxes, which can eat your profits.
Flipping house and renovation is time consuming business. Finding right property at right location can take months. After investing in it, you need time to renovate or fix it. Before reselling, you will need to schedule inspections, so as to ensure that home complies with local building codes.
In case, it does not then you will need more cash and money to correct it. In addition, you will need time to show the home to prospective buyers. Thus, spend lots of time traveling to and fro. Evaluate, if this venture, where you earn 10% profit is worthy or not.
Not sufficient skills
Skilled and professional builders, plumbers or carpenters flip houses as sideline to regular jobs. Actually, they have skills, knowledge and experience to locate and fix. Real cash in house flipping arrives from sweat equity. This means, you need to be handy with hammer, hang drywall, lay carpet, install kitchen sink, and roof a house. If you have to pay professionals for all this task then odds of earning profits will dramatically get reduced.
Professionals wait patiently for right property. Beginners rush and hire first contractor to perform tasks they cannot do on their own. Alternatively, professionals perform the tasks they can and for the rest depend on pre-arranged reliable contractors.
Beginners hire real estate agents to sell the home but professionals depend on ‘sale by owners’. It helps to minimize costs and maximize earnings. Novices make a rush in fixing because their main goal is to earn profits but professionals understand that home sale takes time and profit margins are slim sometimes.
House flip approach as business needs time, money, patience, planning, skill, and research. Take it slowly because if you are determined to become rich quickly form home flipping then you can end in poorhouse deals.