Even in the modern age of austerity, with several western economies barely out of recession, house flipping is still a strong proposition for those with an entrepreneurial mind-set, and the drive to succeed. It has been for a couple of years now. Quite simply, it’s all about finding houses at a lower value, renovating them if necessary, and then selling them on for a profit. There are pitfalls however; this is not easy money. Let’s take a look at three of the major ones here.
Lack of Capital
The simple fact is that you need money to make money. House flipping is not a business or investment that you can get into from scratch. Not only will you need the money to purchase and renovate the house, there are all manner of additional expenses, and you may need money to maintain yourself between sales. There’s also the critical factor of interest. Any houses that you have mortgaged are costing you additional money in interest each and every month. The most successful house flippers will be the ones that can buy properties outright. Good cash flow is essential.
Lack of Time and Patience
If you’re concerned about how long it will take to sell a house, then flipping might not be for you. It can take a long time to bring a building up to scratch, and even longer to actually sell it once it’s on the market. As you’re starting out, all of this time without a sale is time that’s costing you money in living expenses. Timing things so that you’ve got steady income is somewhat of an art, and this is linked to pitfall one; you need to give yourself plenty of time and money to get going. A final point is that right now is not always the best time to sell. Waiting for the market to change might be a better proposition, though sometimes it may be prudent to use a company that will immediately make you an offer.
Lack of Knowledge and Skills
Firstly, you need to know everything there is to know about the buying and selling process, and all of its associated fees. Being unsure is going to hurt your bottom line. Secondly, while you can hire people to do all of the renovation and decorating for you, the more that you can do yourself, the better your profits will be. Finally, it does take some knowledge and experience to know when a property is a good buy – this is not always something that comes easily or quickly.
