There are tons of business ideas available for anyone willing to start a business, but it can be painfully hard to find a lucrative business that requires little capital.
When talking about business, how does house flipping stack up?
What is it, and how does it work? Can you make a significant amount of money flipping a house, with little capital?
Is house flipping risky?
These and more are what we’ll be covering in this article.
What is house flipping?
If you have some experience in the business world, you must have known what flipping is.
Flipping is the act of buying a commodity that is expected to increase in price over time to sell it off for profit when it does.
House flipping is no different. House flippers buy houses and other landed property, expecting its price to catapult so they can sell it for a superior price. House flipping is usually a very quick process, with most house flips completed in a year or less.
While house-flipping might sound simple and straightforward, it isn’t and involves many more complications than portrayed.
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When you decide to flip a house, you’re taking serious risks, and if everything doesn’t go as expected, can be a risky investment. If it turns out well, however, house flipping can just be one of the most rewarding investments anyone can make.
What spells the difference between successful, and failed house flippers?
Continue with this article, and you’ll understand why some house flipping investments are wise ones, while others flop.
Types of house flipping
There are two major but distinct types of house flipping and each has a different strategy and success rate. The type you choose depends on your budget and experience.
A flipper can buy a damaged or poorly managed home at an inexpensive price due to its condition. This house then undergoes a repair process until it is inhabitable. The investor then sells off the house for a much higher price than the price of repair and purchase combined.
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Or a flipper can buy a stable house with no need for refurbishing, but at a time when the cost of purchasing a home is on the rise. The flipper allows the house to increase in price over the cost of a few months and sells it off. This strategy requires more experience, as it is reliant on timing and proper pricing.
Also, an investor is more vulnerable to loss when flipping with this strategy.
As the first strategy appears more popular and risk—free than the second option, most house flippers resort to using the first. While the first option might seem to be not so risky, it is also not totally risk-free, and an investor might lose money if improperly done
Should I flip a house?
Flipping a house might look fun on TV, but it is surely not as funny in real life. If you approach house-flipping the right way, it is a gold-mine. If improperly approached, however, you are at risk of losing a lot more than most traditional investments.
The decision of whether to flip a house or not depends largely on the risk management skills of an investor. Home flipping as earlier said, can be a highly lucrative investment, but there is no assurance that it will always be.
If you’re not afraid of losing some significant amount of money, house flipping is definitely for you.
You don’t have to lose money flipping houses, however. I’ll share some advantages and disadvantages of flipping houses, so you get to know what you’re jumping into.
Advantages of house flipping
Can be highly rewarding, if successful
House flipping has a high potential of turning out well, and if it does, an investor will potentially earn more, as compared to other investments.
Also, flipping houses isn’t a long term investment. It takes one year at most to purchase, refurbish, and sell off the house at a much higher price. This is surely not the same as most high-priced investments, making the business appealing to many investors.
You manage the risks
Unlike being a stakeholder in some company where your profits and losses are dependent on the competence of some CEOs, house flipping depends on your business skills. It is also much different from online investments that abscond with their users’ investments.
This keeps you rest assured that your business is in safe and competent hands, and you decide if you lose or win.
There’s room for personal development
Bargaining, selling, negotiating, and reselling a house, all in a fixed period helps to hone one’s negotiation and time management skills, which are highly relevant in the real world.
You also learn self-discipline and accountability, as you are accountable for whatever profits or losses incurred from houses you flip. Best of all, you learn to interact with new people and manage money, getting you ready for any business in the future.
Disadvantages of house flipping
While house flipping can be highly advantageous, it has its risks, that can flaw the lucrative business. With dedication and experience, these flaws can be bypassed by investors to create a hitch-free house flipping experience.
House flipping is a highly risky venture that requires a lot of capital to start, as it requires buying a house. How Does Septic tank work?
Most flipped houses are bought at auctions or foreclosures. These transactions are usually quick, without much room for afterthought.
Most investors usually discover issues with the purchased property after-the-fact, causing significant issues, and a low risk of making a breakeven, not to talk of making a profit.
High capital requirement
Flipping houses will always require enormous capital, which is scary on its own. The fact that there is no guarantee that you’re getting the money back is another thing that makes it scarier.
Before flipping your first house, it is always recommended to check with an expert, to avoid unwarranted losses. Even with that, profiting isn’t guaranteed.
Flipping houses can be highly rewarding if done rightly. However, there is always a risk of losing some or even all parts of the investment.
Consulting experts before starting can highly decrease your risks of losing. Partnering with other interested house flippers can also significantly decrease your risks of losing outrageously, but can also decrease your profit.
Either way, you have to understand and avoid the risks to be highly successful in house flipping.