The popularity of real estate and flipping shows on television has become huge in the last decade. While many of these shows offer great education, there are also a number of flipping myths floating around.
Myths Vs. the Facts
MYTH: Flipping is easy.
FACT: Flipping is work. Some of the real estate TV shows make flipping look easy; just buy a house, paint a few walls, mow the grass, and make a whopping profit. While some flips are easier than others, make no mistake: flipping is not a 30 or 60 minute TV show. Flipping is a business and like any business there are risks and work involved.
You will face these basic challenges:
- Having enough cash on hand to buy property and pay for renovations, holding expenses, and personal expenses until you make money.
- Getting financing when needed.
- Buying a property at a low enough price to make a profit.
- Learning what needs to be done to flip a property and what each project should cost.
- Locating reliable contractors that perform quality work at sensible prices.
- Selling your house for enough money to cover all expenses and pay you for the time you spent.
MYTH: You can make a lot of money fast flipping houses.
FACT: I’ve made some flips that sold fast and were much easier than others. And while you want to buy and get a property back on the market as fast as possible, most flips require much more than signing a few papers to buy and then picking up your check at the closing when you sell.
MYTH: All you need to know about math is some simple addition and subtraction so you’ll know how much you make.
FACT: When it comes to flipping, the old adage, ‘the Devil’s in the details’ is fact. You need to put numbers to everything. Like I’ve said before, flipping is a game of numbers. Learn how interest rates work, how to measure square footage, how to calculate labor and materials, and how to estimate the time required for projects.
MYTH: Every flip is profitable.
FACT: Flipping is not always profitable. Not only can you get in over your head on a deal, your business is affected by the market, location, supply and demand, and interest rates. “Flips on low-end homes priced below $50,000 actually yielded negative returns in the second quarter of 2015, said Daren Blomquist, vice president of RealtyTrac.
MYTH: Most flipping investors buy foreclosures.
FACT: According to RealtyTrac only 21 percent of flipped properties were foreclosure properties in 2013. And this number has been falling since; so less than 1 in 5 flips are foreclosed properties.
MYTH: Finding houses to flip is too hard now that foreclosures are going down.
FACT: Every day home owners want to put houses on the market. Foreclosures are only one way to find great deals. Properties are sold for less than market value for a variety of reasons; for example to settle estates, relocation, tax issues, or divorce. Just watch my show to see a few. Other properties have simply been neglected and that is reflected in the price.
MYTH: Even if you cannot sell a property you can just rent it and come out ahead.
FACT: Many flippers become landlords and often not by design. There are many reasons you