Are you interested in learning more about flipping a house?
To invest in flipping a home, you’ll need to buy a house in need of a little bit of TLC, spruce it up and then eventually resell it in hopes to make a profit.
If you’re considering a career in house flipping, here’s what you should know about the process.
Return on Investment
Depending on the housing market, you can make a solid return on investment quickly. A standard home closing often takes between 30 to 45 days; if financing allows, it could be sooner. With the right improvements, a flipped home could easily become very desirable and even create a bidding war.
Stock markets rise and fall rapidly, but homes are often considered a stable investment. Since the housing industry doesn’t crash as fast as the stock market, you have more time to predict what will happen. If the housing market does fall, you could still rent out the home and make some passive income while you wait for the market to improve.
In renovating a home, you’ll learn new skills and make some new local contacts. Whether you DIY or hire professionals, you’ll likely need some help along the way. Realtors, appraisers, contractors and technicians will be valuable assets to your home flipping career.
Know the Market
Renovating a home in your own neighborhood will bring you firsthand experience. Maybe you notice condos are selling three times faster than older homes closer to downtown. You might realize that homes in a particular school district don’t sell as fast as those in another. These tidbits will help you become a knowledgeable seller and buyer. When you’re ready to sell a house, you’ll have gained information about your local market and know how your home compares to others on the market.
There are plenty of unexpected costs during the sale of a home. From closing costs to real estate agent fees and more, there are many added costs to manage.
When you make improvements on a home, sometimes taxes can increase. Since buyers generally know a property’s taxes, any tax increases could deter them. Also, depending on when you sell a flipped home, it could affect your annual taxes since your income would have increased. According to Investopedia, if you sell your home too quickly, you might have to pay more in capital gains tax if you’ve owned it for less than a year.
Depending on the market, it might be harder to sell your home as it fluctuates. For instance, if the economy has fallen into a recession or the unemployment rate is high, it might be harder to find people willing to buy. In this case, flipping a home for profit might take longer than you originally thought. Even if you sell, there is the considerable likelihood you might not make a profit or breakeven.
With your lifestyle and financial obligations, flipping a home might be a great way to increase your revenue. Talk with one of our Loan Advisors today if you’re interested in purchasing any properties to flip.