Top 3 House Flipping Challenges

House flipping becomes more and more popular every year. In 2019,  investors hit an all-time high for the number of houses and condos flipped in the United States.

Of course, this doesn’t mean that flipping a house is a walk in the park. Making a ton of money from flipping houses isn’t easy either. Home flipping, similar to any other real estate investing strategy, comes with unique challenges.

Here are the top 3 house flipping challenges you might face as an investor:

 

Finding an Ideal Property

 

When looking for the best deal on a property, there are many things you must consider. For starters, you must consider the location.

Is the property in an upcoming neighborhood?

Is there a demand in the area?

How are the schools and property values? 

Make sure to measure the risk against your reward too. You can do this by factoring in repairs and renovations you must make and see if you will still gain from it when everything is done.

Some of the best places to find opportunities for flipping include:

• For Sale Owner Sites
• Foreclosure Listing
• Local Real Estate Agents and Brokers
• Classified Ads
• Wholesalers

You can use sits like AreaVibes to get an idea of the area’s safety characteristics or sites like Great Schools to get a better idea of the schools in the region.

Making Your Best Offer

 

You must buy a property below market value if you expect to make money from it. In an ideal situation, that property you are considering is already well-below other properties in the region. You will need to negotiate the price if not.

To determine the future value of that home, you can:

• Get a Broker’s Price Opinion (BPO): BPOs are official reports that are designed to provide potential selling prices or estimated value for properties. They take both comps and physical property evaluations into account
• Speak With Local Agents: Ask a local real estate agent for comparative analysis. You’ll want to see what other homes in the area are selling for so that you can see what you might be able to ask for your property.
• Get an Appraisal: While it may be the most costly option, it is the best option for giving you thorough numbers. Appraisers come to the property and provide accurate estimated selling prices with features, condition, and comps in mind.

Finding the Money

 

There is no question that you need to have resources to flip a home. Mortgage lenders require large down payments from real estate investors. Sometimes, you’re looking at 25% or more for a down payment.

Beyond that, you must have the cash to pay for closing costs, repair and renovation costs, utility bills, contractor bills, and so much more. You will eventually need to pay your listing agent too.

A smart investor will tell you that having a large financial cushion (larger than you think you might need) is incredibly important. If your selling process takes longer than you anticipate, you’ll still be able to stay afloat.

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