When you think of investing in real estate, two strategies often come to mind: becoming a landlord or flipping houses. Either method is an option, but they aren’t always the best choice for beginners. In fact, our courses go in-depth with other methods that are much more profitable than fix-and-flip. Here are several reasons why fix-and-flip is not the best strategy to get into this industry.
Mistakes with Flipping Houses is Expensive
First, not every house you buy and renovate will sell for more than what you put into it. If you choose the wrong property or make the wrong decisions in the renovation, you could walk away with a loss. Mistakes in house flipping can be expensive.
Not every house that needs to be repaired or renovated is the ideal choice for flippers. If the issues are structural, foundational or in plumbing or electrical, you could sink more money into the property than what you can recoup in the sale.
Flipping Houses Takes Knowledge
A beginning investor should stay away from house flipping as their investment strategy. When you watch TV shows about fix-and-flip, the people make it look easy, but you don’t see all the failed efforts and loss of money that comes into play.
When you look at a property to consider flipping, you must know the market in the area as well as the cost of repairs needed to get it ready to sell. Not every broken-down house will be fixable in a reasonable budget. Not every renovated home will sell at the top of the market. Because it takes experience to get good at fix-and-flip, learning can be overly expensive.
It Takes Money or Connections
It takes a lot more money to flip houses than to find other ways to invest in real estate. You often need cash up front to buy the property and to pay the contractors to do the work unless you have connections. If you try to do the job yourself, you’ll be out a lot of time and money.
You have to be involved in flipping houses even if you aren’t doing the work yourself. You’re responsible for making sure contractors show up on time, and the job gets done unless you hire a manager, which eats into more of your profits. For many investors, they want to use their money but not their time to increase their income. Flipping a house is a hands-on way to invest, and many investors aren’t good at it.
You’re Limited on Income Potential
Another reason to avoid the fix-and-flip method of earning money in real estate is that you limit your income potential. Most people can only flip one or two houses at a time. They buy a house, renovate it and then sell it before doing it all over again. The profit you earn during that time is limited to what you get out of that one property.
As an investor, there are more effective strategies out there. Learn how to invest in properties without using your own money or credit, using our Niche2Wealth strategies.
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