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The Pros and Cons of Flipping Real Estate

By Kathleen Macky

You’ve been watching some of those reality TV shows about flipping houses and you’re pretty sure you could do just as well as (if not better than) some of the goofs on the tube. What you may not know is that most of those guys have worked long and hard to secure real estate licenses (not required, but useful when buying and selling multiple homes), become contractors (if you aren’t one, you’d better hire a professional for your crew), and learn the ins and outs of the business (from property assessment to money management to securing loans and following local building codes).

So before you jump head-first into flipping, consider some of the pluses and minuses associated with the business.

Let’s start with money

Cash is always the first thought when it comes to starting a career. How much will it cost and how much do you stand to make? The answer to both of these questions is the same: it varies.

If you want to become licensed in real estate, you could enroll in a program that lasts just a few months to prepare for the exam, or you could make a smart career move and get a degree. You may also want to apprentice as a contractor for awhile as a way to start from the ground up. There are several options when it comes to schooling, but you absolutely cannot learn too much. And don’t forget about the initial investment to buy and fix up the homes you’ll be selling. Not to mention, you’ll also need to pay employees and consider the cost of insurance (for both health and property).

As for the money you’ll make…well, that number is virtually limitless. It all depends on how hard you work, how careful you are with spending, and how lucrative the market is.

You will be your own boss

One nice thing about flipping houses is that you have the freedom to manage your time. You will be your own boss. You can work as much or as little as you want (with flexible hours), rush projects or take your time, and schedule in vacations at your leisure. But there are two sides to every coin.

It is also your responsibility to ensure that work is getting done in a timely manner so you don’t have to continue throwing away money on costly monthly mortgage payments (most professional flippers aim to renovate and sell a home before they make a single payment – yes, that means under one month for turnaround).

You may also want to wait until you’re established (or take on partners) before taking time off so you know there is someone you can trust at the helm of your enterprise. And be aware that problems will arise, so plan your schedule accordingly. There’s nothing worse than getting a frantic phone call when you’re thousands of miles away, but that’s all part of being self-employed.

Stress?

Only you can decide if the possible financial gains are worth the stresses of the job. You may make a huge success of your undertaking or fail miserably, and unfortunately, some factors are out of your hands (like the state of the housing market). On the other hand, with proper education, deep and continuing knowledge of the many facets involved in property renovation, solid financial backing, and a sound business plan in place to get the ball rolling (and keep things moving), you stand to earn a good living and enjoy an exciting and fulfilling career in real estate if you choose the life of a flip houses.

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Kathleen Macky owns a real estate website where you can browse Wesley Chapel homes for sale.

About the author

Clever Dude

5 Comments

  • Maybe I missed it, but I didn’t see where this post tells people that most of those who try to become flippers fail, and are, in no small way, partially responsible for the economic problems we are in right now.

    Too many people believed this was a viable vocation and all Americans are now on the hook to make sure that nobody loses “their” home. I didn’t see this listed under “minuses” either. Of course, I’ve heard it said that when the only tool you have is a hammer, all problems look a lot like nails. The writer is a Real Estate person, so maybe she doesn’t see it the same way those of us who have had to clean up the mess see it.

    Maybe I need less caffeine.

  • Personally, the market is still to shaky for me to flip real estate. But I am saving up some funds in the hope of getting an investment property given rental yields are starting to look attractive. I know that when those flipping shows start new episodes is a sign that perhaps the housing market is improving!

  • My parents flipped houses all through out my childhood and it was great for my brother and I. We both learned a lot of DIY stills that have served us well. I’m looking to buy my first home now and think I’ll probably be flipping homes in my adult life as well.

  • Much like anything, you can do really well or fail huge when you try this. Personally, I watch those shows every Saturday and have given some serious thought to house flipping.

    However, like anything, it is something I would plan to start slowly, not jump in with both feet like the author indicates. Your deal is made on the front end – if you over pay for the property you are toast. Second, throw personal taste and wants aside and know the market you are in. If you are flipping a 100K home, you do not put granite on the counter.

    I like the idea of flipping a couple of houses a year to help supplement my income. I look regularly for houses in the 50K range to 100K that are good candidates.

  • I, too, fell in love with the idea of flipping. Fortunately for me, I never got into the biz. It’s too much like being a day trader versus a long-term investor. I do like investing in real estate (rental property for example). I guess if you could find a place that you believe would make a nice primary residence or rental, but coulld also be a flip, then you would have more options and it might be worth considering. But if you’re looking at a property that you would “have” to sell in a short period of time you’re asking for trouble.

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