Buying a house these days is almost an impossible feat for many. Given the housing market’s fluctuating prices, together with the growing debt crisis, getting that home sweet home is barely even achievable. That’s why more people are now looking for properties they can flip.
Fox 13 News says that house flipping became popular back in the mid-2000s when people were buying ugly houses to renovate into something more ideal. There was a massive market for it before. However, appreciation in home values remains almost the same since 2006.
Although the idea behind it sounds simple, the prospect of buying a house, renovating it, and then putting it back on the market for a higher price isn’t a walk in the park. It’s a financial risk that can either provide you with a high return potential or leave you with a property that isn’t generating any money.
To save you from committing this financial drawback, here are a few pitfalls you need to avoid:
Insufficient funds
Getting your hands in real estate is a costly investment. You need to worry about the property acquisition cost aside from worrying about the mortgage. Although the interest rate on the borrowed amount is tax-deductible, you’ll not get the full deduction for it. This means that you need to earn the money you spent on interest from the sale, so you can get your investment back.
Investopedia says that the only time the interest rate will become 100% deductible is if you use the home equity line of credit to finance your purchase.
Lack of time
Renovating a house and flipping it requires a lot of time. That’s on top of the amount of time you need to spend to find the right property to purchase. For those who have a day job, flipping a house means you need to spend all your free time on demolition and construction, so you can put it up for sale the soonest. On the other hand, if you want to make things easier, you need to spend money to pay someone else to do the renovation for you.
Once you’ve completely renovated the house, you need to schedule an inspection to ensure that it complies with the house building codes before you can put it up for sale.
Poor knowledge
So that you can quickly get your money back, you need to know how to choose the right property to flip. It’s not enough to look for the best mortgage rate in Salt Lake City without a sellable property. Remember that large companies are flipping homes in select areas. So, you will be dealing with companies who also see the same target market as you do.
Buying a house to renovate it is an excellent idea, but you first need to understand the area’s housing market before putting your hard-earned money into it. Get as much information as you can about flipping houses. Doing so will increase your chances of selling the property at a higher price.
