A few years ago, the practice of “buying low, selling high” was rampant in the real estate market. People bought houses on the cheap with no other intention but to fix them up and then quickly resell them for a much higher price. These days, it’s still something that happens, but it seems like the amount of people doing so is much smaller. And while there are a few people who bank on the “get rich quick” idea, most people end up with risky investments and considerably high costs for renovations and rehabs. There are a few things to consider if you’re thinking about getting into flipping houses.
Market Value and Associated Rehab Costs
Flipping real estate with the goal of turning any profit means buying the house at well-below market value. For example, if a house would be worth $150k after a rehab, it’s important to spend much, much less on the property before it’s fixed up. It’s also important to consider the costs associated with rehabbing and reselling—a $20,000 kitchen added might not add $20,000 in worth to the building, and title transfer, holding costs, and other reselling fees can knock out profit margins faster than you think. Television shows that focus on people flipping real estate are not a realistic goal—those shows rely on advertising money and are also producing shows based on dramatic reselling, which is not the norm.
Protecting Properties
If you’re working on a building that will be otherwise vacant for several months, it’s important to secure the entry points so that people can’t break in and sabotage your hard work. Vandals will damage interiors or steal tools left on the site, and people may break in to stay in the home if they’ve got nowhere else to sleep. Don’t leave your investment unsecured. Using steel security window covers on all of the windows ensures no one will be able to enter through windows, and installing a door guard on the front door (and any other doors accessible from the outside) to prevent anyone from simply walking right in.
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