The Dangers Of Flipping Real Estate

By Gloria Smith

It's true that flipping real estate properties is one sure way of earning big bucks in a short span of time. When done properly and with careful planning and budgeting, investors have a good chance of attaining success. However, flipping homes is not as easy as some people might think because there are risks and downsides to this endeavor the reason why it's always best to be well informed before taking the plunge.

Flipping real estate is not just limited to buying a home, renovating it a bit and reselling it for a profit. Several vital factors are still involved which investors have to be aware of such as renovation expenses, property taxes, insurance and mortgage costs as well as rental pressures.
If you're buying a distressed property, you will need to spend some money renovating it before reselling the home.

In this case, you will have to estimate your renovation costs including materials and labor to avoid going overbudget. If you spend so much on the upgrades, you might not be able to recover your expenses and get a good profit by the time you sell the property especially in an unfavorable market condition. So the best thing to do is save money on building materials, paint and appliances if possible. If you can do the repair works yourself, well and good.

There is also the danger of increasing your property taxes if you fail to resell your flipped home right away and hold it for a few more years. Investors should be aware that taxes have nearly doubled in a period of five or six years in some hot real estate markets.

Failure to sell the home quickly is another risk flipping investors have to face. Real estate investors suggest that flippers look for buyers who are eager to live in a home and give them a lot of motivation to purchase your home. One way of drawing buyers is to stage the property meaning, make it attractive and clean inside and out as possible. It's a good idea too if you pre-qualify potential buyers who call to inquire about your property. Don't waste your time entertaining buyers or investors who are not serious enough in getting your home.

If your property stays long on the market, you might be forced to just have it rented. Also, there's a chance that the rental fee you charge may be less than who want especially when the market is saturated with rentals. With this situation, it will take long for you to recover your expenses and earn your profit thus, leaving you with a bad investment.

If worse comes to worst, you can opt to just sell your home at a very low price or keep the property and accept your loss then continue with whatever plans you have. Holding on to the property for long will only discourage you all the more. If you failed to study your plans before, then it's high time that you learn about the basics of buying and selling real estate so you can avoid the common mistakes. You can use various resources from books to the internet and you can even attend real estate seminars in your locality if they're available.

This article is brought to you by PropertyFlippingInfo.com. Read articles on house flipping, hard money lenders, and real estate short sales.
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