By Kaitlin Krug-Byrd
In the past decade or so, the practice of flipping houses has often been presented in an unrealistic light due to growing popularity of home improvement shows and a never-ending supply of “how-to” articles. All too often, a home featured on “Flip or Flop” (or any similar cable show) will yield a $50,000 “profit”, setting a potentially unrealistic standard for viewers. Assuming house flipping is something anyone can make a career out of?
My advice: keep your day job for now.
Although it has the potential of being a successful vocation, flipping homes as a career is challenging and accompanied by an abundance of risk.
You Need a Great Deal of Money to Start
The most important aspect of becoming a successful house flipper is owning a house. If you’re not in a position to purchase a home, you have nowhere to start. Also, keep in mind the thousands of dollars you’ll need in order to make the appropriate improvements, not to mention the carrying costs if you buy the property using a loan. You have to make a profit, after all. However, don’t forget about that risk! Not every house flipping attempt is profitable. If you make the wrong improvements or if you come across unforeseen issues, your cash cow property could turn into a headache and money down the drain. Are you prepared to put hundreds of thousands of dollars on the line for a malleable profit margin?
Knowledge and Understanding of the Market
Understand the many complex nuances of the market before you dive in to the game. You must be able to recognize when you’re getting a good deal on the house. Is it priced at market value? Above market value? Are you getting the best deal you can? What’s the status quo for the surrounding neighborhood? Do all the neighbors have granite countertops and wood floors? Centralized air conditioning? Manicured lawns? You need to be able to make smart and meaningful improvements that will pay off in the end. Not every home requires the same upgrades. Sometimes a good spring cleaning, a fresh coat of paint and new carpeting is enough—but other times you will need to dig deeper.
Flexibility and a Reliable Team
Flexibility is key. It’s possible that you will need to move around to different cities in order to be sustainably successful. That could mean moving from Boulder to Broomfield, or it could mean moving from Fort Collins to Colorado Springs. The more flexible you are, the more options you will have. Also, you can’t forget about a team. Chances are, you probably don’t have specialized knowledge for all the necessary factors in your house flip. Unless you understand how to be a contractor, landscaper, real estate agent, lawyer, plumber, electrician, and construction worker all at the same time, you’re going to need a little help. Establish a set group of companies and individuals that you can consistently rely on to get the job done in a timely manner and at a fair price. Now, let’s return to the initial question: Is house flipping a cakewalk, or is it too burdensome to be worth it? You tell me.
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