House flipping – buying, fixing up and selling a home in a year or less — is increasingly becoming a popular way to grow your wealth. RealtyTrac figures for the first quarter of 2017 show 6.7 percent of all condo and single-family home sales in the quarter stemmed from flipping, a total of 43,615 sales. Two-thirds of flips were paid for in cash. The average sale price and gross profit were $200,000 and $64,284 respectively. Note that gross profit excludes the costs of rehab, financing, property taxes and other carrying costs. The average return on investment in Q1 was 47.4 percent.
Clearly, there is a lot of profit potential in home flipping, but there is also much risk. You have to know what you are doing and the proper sequence to do it in. Flipping properties is something you might have been mulling for a long time. It takes a while to become comfortable with a new idea, especially a risky one that requires time, money and hard work. The prospects of home flipping and/or landlording can seem pretty exciting, especially when you concentrate on the income potential. However, home flipping is a business, not a hobby. Success or failure can have a huge impact on your wealth, so it’s not a commitment you want to take lightly. If you do decide to make the commitment, it must be a total one, and will require a lot of learning.
You never stop learning, but if you’ve never flipped a home before, you must start learning all about it before jumping into action. Some folks get sucked into expensive guru training camps that reveal all the secrets to obtaining real estate riches. These camps can cost a small fortune, and we think the money should instead be used for buying your first property.
There are many low-cost ways to learn about home flipping. In addition to reading this e-book, check the library, Internet and book stores for books and videos that address home flipping. Three good starter books packed with flipping knowledge are:
- Flipping Houses for Dummies
- FLIP: How to Find, Fix, and Sell Houses for Profit
- The Book on Flipping Houses
If you are going to have help from family members or friends, teach them what you’ve learned, since that’s often the best way to assimilate knowledge. You want to find out why things work the ways they do, so you have to delve below the surface of obvious knowledge. For example, you’ll want to research local zoning laws to see how they affect the decisions you make.
You don’t have to be paralyzed from the fear of not knowing everything before you get started, because you can get stuck in education mode forever. Learn the basics, recruit some expert help, and move on.