5 Common Misconceptions Investors Hear About House Flipping
It often happens that when homeowners renovate and update their own home they begin to think they are ready to dive into flipping houses to make money. While some people jump into flipping homes and have success, many find themselves in the opposite situation.
House flippers who are new to the real estate market may not be prepared for the problems that they face. Before jumping into the frying pan, investors should start with these five common misconceptions about housing flipping that are not true.
An Easy Job
People jump into investing in houses with the intentions of an easy flip and easy money. What people do not realize is that it takes time to build the skills and the resources for projects to go smoothly. Seasoned house flippers may have an easier time with their investment properties because they already know who to call when something goes wrong and have completed these renovations many times before.
All real estate investors will run into problems. Some homes have hidden problems in wiring, plumbing, foundation, and so much more. Being prepared to handle these problems is key to the process continuing in a smooth progression.
A Quick Flip
There are so many ways a house flip process can be stalled. Buying the house can be a slow process to begin with. Taking the time to hire contractors, get permits, get inspections, have the home appraised, and deal with insurance companies can take a huge chunk of time. With every day passing an investor is spending more money on a mortgage.
Those that have these resources already lined up from previous jobs can make the process much quicker. The first home an investor flips is not likely to go quickly. Nor are the first ten. It will take any investor a while to learn how to flip houses quickly and efficiently.
A Fast Way to Make Money
A concept that many people are misled by is the fact that people make money from house flipping. In the end, many investors see a profit from their investment. They may even see a significant profit. However, during the renovation process, all of that money is coming from the investor’s pocketbook.
The rent payments, insurance, renovation costs, and any unexpected expenses must be handled. Not to mention the closing costs and the costs of hiring a real estate agent if desired.
To make money from house flipping an investor must be prepared to shell out a lot of money upfront. The reward is not immediate, especially if major delays prolong the process.
Investing too High
Some investors set their eyes on expensive properties. They are thinking of the major profit to be found in more expensive property. This is a dangerous game to play. At a higher price point, it can be more difficult to find a buyer. The investor may have to wait until a buyer comes along well after the renovations have finished. This serves to increase their overall costs in insurance and mortgage payments.
Thinking it’s Impossible to Start Investing
No one should set out to start an investment project if they are struggling to put food on the table. Having a steady income and a generous amount of money set aside for problems is ideal.
However, there is no need to have everything in cash from day one. It is okay to use loans or even a home equity line of credit to get started investing in real estate.
A real estate investor has to know what they are stepping into. Without knowledge about the real estate market and how renovation projects progress they are likely to make major financial blunders.
Many people are successful in flipping houses, however, it is not for every homeowner. Anyone interested in flipping homes must realize everything is not as simple as making a few updates and in turn making thousands of dollars.