Fully 10% of all U.S. houses sold in the first quarter of 2022 were flipped, according to ATTOM Data Solutions. While the job of a REALTOR® is to help clients buy and sell houses, sometimes they themselves buy properties to update and resell for profit. So agents should know the ins and outs of house-flipping, for themselves or to educate clients thinking of doing it. The reality isn’t as fun and easy as it seems on TV shows. Here are four mistakes to know and avoid.
Not calculating finances properly
After paying for the house and fix-up costs, there are still taxes, insurance, utilities and other bills that may pop up. Also, something like a structural issue or roof leak could occur. Then once you sell, there will likely be capital gains taxes, diminishing the profit. So a home flipper needs to be extremely liquid and cash-ready.
Not having the time
Flipping a house is a very time-intensive venture. Organizing and hiring the people who will do the renovations, then overseeing everything requires lots of time. Then even after the work is done, inspections are next, followed by the time needed to put the house up for sale, follow through with REALTORS® and all the other professionals involved in a sale.
Not having patience
Unless it’s a white-hot market with low mortgage rates, selling a house takes time. And that’s not what someone flipping a house has in abundance. Time is money due to having to cover the costs of a house before it sells. Add that it’s likely listed for a high price due to all the money put into it in a short period of time, and there can be a lot of stress waiting for a buyer.
Not knowing the market
Planning to resell a house shortly after buying it takes a lot of courage. More importantly, someone buying to sell must know the local market as well as an experienced REALTOR®. Understanding what renovations to make, what the tax and zoning laws are and what the competition is can determine making a big profit or taking a substantial loss. House flipping is a tough business, no doubt.