What does flipping houses means?
Flipping is a term used when someone buys an asset with the intention of reselling it for a profit. Usually, flippers hold the asset for a short time to avoid associated expenses such as interest, fees, and other charges. In real estate, flipping a.k.a flipping houses or house flipping refers to buying a house, renovate it, and then selling it for a profit.
House flipping can be risky to investors without enough experience and resources. This is why having a solid understanding of the real estate markets, access to reliable contractors, using an experienced real estate agent, and having resources are crucial to the success of a house flipper.
How much money can you make flipping houses?
The returns from flipping houses vary from one flipper to another. These returns depend on the location, experience, market, etc. In general, it is possible to make a good return on investment while flipping houses.
According to ATTOM Data Solutions, the average flipper made $64,900 during the third quarter of 2019 which was a 41% return.
You can see that if you put in enough effort and play the game like big guys, you can make a good living from flipping houses.
How to flip houses?
You can flip a house by using the following steps.
- Learn, learn, and learn about the real estate market
- Put together a budget and treat house flipping like a business
- Have a solid financing that will sustain you before you flip the house
- Make sure that you have reliable contractors and house inspectors
- Have a reliable real estate agent with enough experience
- Find houses with the highest returns to flip based on your standards
- Buy the house and make sure to bargain on the price
- Renovate the house to the best of your abilities (take care of all the DIY projects to save money)
- Resell the house at the best price possible
Mistakes many people make when flipping houses
Not everyone succeeds in flipping houses. There are people who make a fortune from flipping houses and those who lose their retirement funds while flipping houses. So, why do some people lose money while flipping houses?
Well, the following are some of the mistakes many people make while flipping houses that cost them money.
1. Lack of patience
Patience is everything in every business. Those who wait for the right moment before they strike end up buying houses at a discount. House flipping professionals wait for the right time before they buy houses. This is why they win exponential returns.
Novices, on the other hand, think that every house posted online can be flipped. Of course, every house can be flipped. However, if you flip houses just to flip them, you will be heading into financial troubles. The main goal of flipping a house is to make a profit. For this reason, a house without a meaningful return should not be flipped.
2. Not having enough experience and skills
Experience differentiates winners and losers in every industry and business. Investors with enough experience know where to look, what to avoid, how much to spend, when to buy and sell, etc. This is not something you learn overnight and certainly not something you learn from watching other investors.
You learn all these tricks and the know how through experience. It takes time and patience to built experience.
House flippers without experience buy the wrong properties, spend more than they are supposed to spend, buy at the wrong time, and sell while they are supposed to hold the property a little longer.
Experience also increases the skills of house flippers. The more house you flip the more you will learn about the industry and build your skills.
3. Not having enough money
Although you don’t need a million dollars to start flipping houses, you need enough money that will sustain you for a while. Flipping houses solely on a mortgage will increase your risk of losing money on the house.
This is because you will pay mortgage closing costs, fees, and other charges. In addition, you will pay interest on the mortgage every month until it is fully paid off. So, if you buy the house with a mortgage, your monthly payment will be higher due to the interest rate and the principal payment.
If you happen to hold the house for a very long time, you will end up spending a lot of money on the house. This will not be financially feasible in terms of house flipping.
4. Not giving themselves enough time
Timing is very important in real estate. The buying and selling time are crucial for maximum profitability. Experienced house flippers buy when houses are cheaper and sell when there are maximum profits.
Since it takes a lot of time to buy a house, flip it, and sell it; it is important to have enough money that will cover you for a while. You must also have enough time to make sure that all these projects will be covered without a rush.
Without enough time, you will rush through the flipping process or end up selling the house prematurely. As a result, you will make less money on the property or sell it at a loss.
