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Over the past few years, the US housing market has even seen an increase in homes sold as flips.In fact, popular real estate website Trulia estimated that approximately 6.1% of home sales in 2016 were flipped properties, which is up from previous years. As investors try to take advantage of real estate gains, many are choosing flipping homes over holding the properties.
However, some experts warn that this shift is a mistake, especially for inexperienced investors. While real estate is overall a safe, lucrative investment, flipping homes puts dollars at risk.
“Flipping is a risk business,” said Trulia economist Ralph McLaughlin in a CNBC interview.
While some investors can make big profits by flipping homes, success takes skill in identifying properties that are distressed or in need of repairs that can increase value. These properties might be in areas where properties are temporarily devalued – such as after a major disaster – or they may belong to owners who are stretched too thin to make payments.
Homes may also be flipped if their value can be increased through renovations. In this case, the flipper must be able to do the work themselves – or with their own crews.
Real estate agent and home flipper Mark Ferguson told Time Magazine that most new home flippers don’t realize how much money they’ll need to invest into the property to finance it, fix it, and get it sold.
“That’s the biggest mistake most new flippers make: they don’t know all the costs,” Ferguson explained.
Those costs are why many flippers see their profits go down instead of up, which is a nightmare for any home investor.
Unless the investor knows how to strategically play the market by choosing undervalued, distressed properties that are expected to rise in value or by relying on their own repair crews, they should stick to holding investments, such as rental properties.
While holding onto properties requires long-term management and risks short-term depreciation, in the long run they are a secure investment, as real estate historically rebounds. However, making larger sums of money on holding properties usually depends on a lot of capital, which is often in short supply.
Whatever path an investor chooses, experts recommend that they educate themselves about the process and risks ahead of time. Though the risk will remain, strategic decisions are the only way to make big returns.
For more information about flipping homes, contact us at (281) 212-3040 or visit http://www.sellmyhousecash.today/ for more information.
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