House flipping is one of the more popular and well-known ways to make money in Real Estate. Some investors are religious flippers and others won’t go near it.
Depending on your specific situation, you may find that flipping is a good strategy for you – or that it’s not!
Below we walk you through the biggest Pros and Cons.
Pros
Profit Potential for High Returns
Successful flips can yield substantial profits – one of the reasons it is an attractive strategy. This happens when a property is purchased at a low price and the renovations/repairs are well-executed, allowing for a high sales price.
Rapid Turnarounds Lead to Quick Sales
Another reason flipping is a popular strategy is because not only can you see high profits, but in a quick amount of time. Fast turnarounds allow investors to move on to the next flip or project quickly.
Tax Benefits
Tax advantages can be a big benefit as well depending on your location and circumstances, like deductions on renovation costs.
Cons
Financial Risks
Market Volatility
Flipping is sensitive to the fluctuations in the market. Economic downturns can play a role in property values and sale prices.
Timing the Market
Because of market volatility, investors run the risk of mistiming the market. This can lead to reduced profits or even worse, financial losses.
Intensive Work
Flipping requires a lot of time and effort on your part, especially the more involved you are. Delays for any reason, like with permits, can impact profits.
Financial Challenges
Capital Requirements
A barrier to entry with flipping can be the significant upfront capital required, along with securing financing. This is especially true for new investors.
Unexpected Costs
Renovation challenges can lead to unforeseen costs, which affects the bottom line of the flip.
Quality Concerns
It is crucial that the renovations are done well, because if the job is done poorly it can negatively effect the property’s resale value.
Need help assessing a flip deal or getting started with real estate investing in general?
Then please reach out! We are always eager to help like-minded individuals who want to make money in real estate!
