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House flipping is a concept you might have seen on television or heard associated with big-name celebrities, but taking on this type of project can be harder than it seems. Before you contact a contractor to help you with a house-flipping initiative, let’s explore the pros and cons of this task.
The benefits of house flipping
The most obvious benefit of flipping a house is cashing in on your restoration efforts. The goal of house flippers is to buy an affordable property, and then upgrade it to sell it at a higher price. House flipping is often lauded as a quick way to make a good chunk of money. Depending on the market, flippers can start to see a ROI as soon as their house is purchased.
Read more: Flipping houses 101
The drawbacks of house flipping
Although house flippers have a chance at making a large amount of cash in a short amount of time, there is also substantial risk involved.
After a house has been flipped, the house flipper typically needs to pay a real estate agent’s commission to ensure that the property is sold. Individuals also need to consider the cost of repairs that need to go into the home before it’s safe (and desirable) enough to enter the market.
Many experienced house flippers know that it’s important to take the time to assess the risk involved before purchasing a “flippable” property. This means determining exactly how much money needs to be spent on repairs, inspections, labor, and general construction throughout the entire project before it begins.
Gauging an investment also means taking outlying factors into consideration, such as market demand and the state of the community. For example, a beautifully upgraded house may not be quick to sell in a neighborhood that is experiencing a downswing.
House flipping can be a rewarding experience in a fiscal and emotional sense. However, an ample amount of planning needs to go into this type of project in order for it to be a success.
Read more: How to save taxes on flipping houses