What is the Business of Flipping Houses? How Much Risk is Involved | Success Path

“Flipping houses” is the term used to describe the process of buying a run-down home, fixing it up, and reselling it for profit. With any type of investment, there is some risk involved, and flipping houses is no different. With house flipping, you are juggling tens or even hundreds of thousands of dollars, so it is crucial to know what you are doing. However, people do it because the business of flipping houses can be extremely lucrative.

Common Mistakes in House Flipping

While flipping houses can make you a lot of money, there are a few basic mistakes that can make it an extremely risky business.

You have to plan for the expenses

There are a lot of fees and taxes in buying and selling a house that people forget to count in when they’re adding up the cost. You’ve got to know how much property taxes and holding costs are, or you can be in real trouble.

Over or under-estimating time, resale value, and costs

Not learning how to make accurate estimations can be really dangerous in the real estate business. If you underestimate the time you need to rehabilitate and sell a house, you could pay too much in utilities, taxes, etc. On the flipside, if you overestimate those things, you could take out a heftier loan than you need to and pay more in interest. Obviously miscalculating the resale value–the money you make–can lead you to problems if you don’t make enough on the sale.

Overpaying for the house

Not making a profit on the house is a huge mistake, because that’s the whole point of the flip. It’s too easy to sink your whole budget into a house, only to discover that you’ve barely broken even when you sell.

Don’t Worry, There is Help and Hope

Don’t get us wrong– we’re not here to scare you off of real estate investing. We simply want you to go into it bright eyed, bushy tailed, and educated. One great way to reduce the risk of starting to flip houses is our Success Path Education workshops, which can help you with strategies to lower risk and increase profit. For now, here are a few tips to ease your mind.

Negotiate the cost of the house

You may have heard that you “make money when you buy the house.” Since you can never depend on the housing market to stay stable, it’s important to be sure that you can make a profit from a house.

Inspect the house

Even if it’s been inspected by someone else recently, it’s always good to get a thorough inspection of the house done as soon as you can. While repairs are a normal expense with flipping houses, you want to know what they will be before you place an offer on a house so that you can get a reasonable price for it.

Get it insured

This is often the easiest tip to overlook, but it is crucial. After purchasing a house, get it insured as quickly as possible. Protect yourself from disasters like fire or flood to ensure that your money won’t get sucked into fixing an accident.

Don’t cut corners

We know it’s tempting to go for the cheapest possible solution in order to save money, but this could hurt you in the long run. Buyers will notice a poorly cared for home, and they will be less interested in buying because of it. Doing things the right way the first time will increase chances of making a sale at all, let alone a good one.

While getting started in the house flipping business can be scary, remember that you can do well, especially with help from Success Path!