Is flipping houses realistic?

[lorraineb]

OK, I admit I am kind of an addict to those flipping houses shows on TV. I don't have any experience in doing it and I know that it can't be as easy as they make it seem on TV, but how realistic is it to make money from flipping houses? Has anyone here every tried it? What things do the shows leave out that can cost money and ruin your profit?

[Ged123]

Hi,

I am sure that this technique can be used, but I think it was easier before 2008 when credit was more readily available.

But the economic climate is improving so it may become easier soon.

Just my thoughts
Ged

[disneysteve]

What things do the shows leave out that can cost money and ruin your profit?

I've never seen any of those shows but I suspect they make the process look far easier than it is. What can go wrong?

Unexpected findings during the remodel. You open a wall and find damage you didn't know about or is more extensive than you thought.

Contractors go over budget, or don't show up, or do a shoddy job that you then need to pay someone else to fix.

Work you do yourself takes a lot longer than anticipated.

The finished product doesn't sell for as much as you had hoped, or takes longer to sell than you thought, or both.

Lots of stuff can go wrong. Flipping can be done successfully but for someone with no experience, I certainly wouldn't recommend it. You really need to be able to do most or all of the work yourself quickly and professionally.

[Petunia 100]

Flipping houses can be very profitable, if you know what you are doing. If you don't, it is a great way to lose a lot of money.

[lorraineb]

I noticed today as I was watching that most shows don't include the cost of real estate selling fees. Isn't that 3% - 6% of the house's selling price?

[Jerry91]

An important down side of flipping houses is the tax issues. In case you buy a house and fix it up and then sell it off while you are working, then it will be considered as your investment and you will have to pay short term capital gains. However, if you are in it for the year round and the income helps you pay for your living, then it will be considered as your business and you will be considered a dealer-trader.

[mortgagereport]

Flipping houses

At least in my area, foreclosures and rehab properties regularly sell as cash only deals. That means that only contractors and investors really have any hope of buying them. They are professionals so they can go in, fix it up (not exactly with a designer's eye, but certainly improving the property), and unload it very quickly. For the common guy, it's pretty hard to get in on this game. If you are an owner-occupant trying to do the work yourself, it will take a long time unless you are very experienced with this kind of work. It's easy to get carried away with improvements that don't actually have much hope of realizing a return. If you aren't living there, you might get hit with a much heavier tax bill on any profits you make. In short, it is possible, but like every other kind of investment, there are risks.

[pbnj]

I used to work with a "Flipper" before it was called that and the key is to have some pretty deep knowledge on what it takes to rehab a property, access to some good, cheap labor or the ability to do the work yourself. I watched my old boss, Dave, make over $175,000 pure profit off of a flip where he poured a foundation/basement in a very nice area and trucked in a house he had purchased and rehabbed in a crappy neighborhood. We lowered the rehabbed house onto the new foundation, finished the basement and within a couple of months, he was up a buck seventy-five!

[lbpeninsula]

All that glitters isn't gold!

[jbax]

You can make money at this. BUT it is a lot of work and carries a lot of risk. I guess you have to do your own risk vs. reward calculations.

You said that with the improving economy it should be easier to do this. I think it is just the opposite. With a recovering economy people are usually able to stay in their houses, meaning fewer foreclosures. Granted, a house does not have to be a foreclosure to flip. But it does take a lot of the inventory off the market. Plus it lends itself to a seller's market, which means you will not be able to buy the fixer upper as cheaply.

That being said, there are many pitfalls that await. Again, part of the risk/reward. You have to know your stuff. You have to keep a strict budget and timeline. You have to be willing to sell your home below market value. Know what improvements add value and which ones waste money.

And like you said, most of the foreclosures are cash only sales. That does not mean that you cannot buy them, it just means that you have to have a pre-approved loan or line of credit from the bank. When you go to purchase the property, it is paid with a cashiers check instead of a traditional mortgage.

[Peaples]

Absolutly it does take a bit of investing though but its almost a certain profit in the long run.

[Fishindude77]

I think it makes a lot of sense for contractor type people who have the tools and skills to do a lot of the work themselves. Have one of these projects to work on when jobs from your paying clients slow down.

A couple mistakes I have seen are:
a. Keeping the property too long. You need to buy it, get the work done and sell it in a few months, so you don't have to worry about upkeep expenses, taxes, mowing, interest expenses, etc. that will eat into any margin.
b. Over-remodeling for the market. Usually doesn't make economic sense to do full gut out and re-work. Just clean up, paint, basic repairs and sell it. Also has to be priced in the same range as neighboring homes.

[chessie21]

I believe possible

YOu can learn how to do anything. If that is what your interested in then go for i

[Vendor155]

buy up houses in a village that will have a great development plan for the next 10-20 years, and sell them in 10 years, should make profits