To Flip Or Not To Flip…That Is The Question.
Nov 21, 2007
Author: Family Realty LLC

To Flip Or Not To Flip…That Is The Question.


With what seems like every TV station hosting a weekly show about investing, it is little surprise that everyone thinks they can delve into real estate investing-or flipping-and turn a quick profit. Doing so is not entirely impossible; you too can succeed, especially if you go into it with realistic expectations. Apart from the obvious financial rewards you can reap by buying low and selling high, you can also take away a great sense of satisfaction from creating wealth for yourself. Beware, “flipping” isn’t for everyone…here is an overview of what you can do to successfully flip a home, or decide if doing so is even for you.

I would like to emphasize the importance of knowledge when flipping a piece of real estate. I know its cliché to say that “knowledge is power”, but it is surprising how many people will venture into an investment situation without the proper knowledge and guidance.

Your first step, as with anything that has to do with money, should be to understand what you’re getting into. When you decide to flip a house, you will not only need to know how to buy a house, but many other intangible things, as well. You also need to have a good grasp on negotiating deals, financing, insight to particular neighborhoods, and much more.

Take stock of your finances. It takes money to make money. In most cases, you’ll borrow money, but you will usually need a down payment and you’ll have to start servicing that debt right away, all while you are fixing the place up. Simply put, make sure you have some cash on hand to keep the “flip this house” project moving.

Furthermore, you cannot be fearful of debt when attempting to flip a house. Unless you have a stockpile of cash in your checking account, you will need to take out loan(s) to purchase the house and improve it; your mortgage/banking specialist can help you with this. If you get out of your comfort zone and cannot handle monthly payments for the project, then you may want to rethink your business.

Lastly, you must consider the downside when it comes to finances involved in flipping a house. Make it a point to quantify what the worst thing could be…asking yourself tough questions such as: “What if I cannot sell the house for my desired price?” or “How much can I lose on this deal?” Realize there are risks involved and define what the situation would be if it takes nine months to flip a house, instead of your projected three.

Flipping a house may look easy on TV, but to be successful you’ll have to have patience and a little more than some extra change in your pocket.