The truth about real estate flipping is that everyone seems to have the desire to do it. Most people who want to get into the game of property flipping think it is easy, simple, and quick. I can give you six good reasons that this not true:
1. Scarce Opportunity
If the opportunities were readily available, there would be no demand. You have to be way ahead of the game, the opportunities, to procure a property below market value before the home is offered to the general public.
2. Cash Flow
Many people don’t understand what a quick $25,000 or $50,000 really means. Buy a property at $150,000 and then plan to sell it at $200,000—Is this really a “quick” $50,000? First, take out the closing costs to purchase, then take out the ninety or more days of carrying the property with taxes, insurance, and utilities, cost of repairing the home and labor, cost of selling the home, commission, taxes, attorneys, and fees. All of this adds up to making your “quick” $50,000 much less than you thought.
3. Lack of Resources
Professionals have inexpensive or “cash” labor. They also have discount contracts at supply companies for below fair retail cost for items and tools. Furthermore, they have the connections at the towns and municipalities to get the certificates they need in a timely manner. Lastly, professional flippers have extensive knowledge on making the most of their resources.
4. Lack of Time
If you are not going to tenaciously dig, dig, dig, for the opportunity or just think you can do this on any given weekend, the above aforementioned three points should have discouraged you by now.
You need to have on hand the value of the home in cash, plus the labor, plus the caring costs, and the fees in order to sell in cash! I mean, if you are thinking of financing a flip project…I’ve got to say, forget it!
6. Get in and Get Out
The point of a flip is to get in and get out. When involved with flipping a property, you do not want to waste time in order to make a solid profit, but how much depends entirely on you.