Flipping houses is one of the fastest ways to generate a sizable profit but this is not a get rich quick scheme. While there are some who may believe that they are ready to take on this sort of task, there are a number of disclaimers that need to be provided.
Those who are wondering if they have the wherewithal to take on such a task would do well to take a closer look at the following guide. The average person may have been led to believe that they have the ability to handle these concerns on their own.
However, someone who has never flipped a home before may be woefully unprepared for the unforeseen steps that they are going to have to take. Read on to learn more about the following reasons why these projects are not recommended for beginners who have never taken on anything of this magnitude before.
The 3 Reasons Why Beginners Should Not Flip Homes
1. Too Much Assistance Is Needed
In a perfect world, those who are looking to flip homes would wait until they are a bit more self sufficient. Friends, family members and hard money lenders can provide assistance but this help comes with a steep price. The same level of work is going to be needed whether financial assistance is provided or not. Why would a first-time flipper put themselves through such difficulties?
An additional team is also needed for projects that are this large. Is the average beginner going to be able to handle all of the necessary repairs on their own? Will they need to hire a contracting crew? In most instances, the answer is going to be yes and this only adds to the level of expense that is created. Everyday repairs are one thing.
But what happens when serious renovations are required? No one is going to be able to handle them on their own, especially not a first time flipper. It is commendable to want to take on this task without assistance but there is a major difference between what is commendable and what is advisable. Flipping an entire home is never going to be easy as it appears to be from the outside looking in.
2. Lack of Cash Reserves
Some beginner flippers may make the mistake of assuming that they have enough money on hand to make an attempt on their own. Unfortunately, this mentality ignores a few key facts. First of all, the amount of money that the flipper has on hand is almost never going to be enough to cover the necessary repairs that are going to have to take place. There are simply too many unexpected expenses.
Flips are always going to come with a number of surprises. There is no telling what is going to happen once a homeowner embarks on this process. There is an old saying about never making a big purchase unless it can be made several times over. This is especially true for those who are considering taking on a task like this one. A first-time flipper may be able to afford the home itself.
However, their ability to pay for all the necessary repairs could come into question. Those who are over-leveraging themselves are painting themselves into a corner. They will not have the funds needed to handle difficulties.
Not only are they unable to flip the home after they have acquired it but they are also left holding the bag long term. The property does not gain in value and they are unable to sell it off because they do not have the funding for repairs on hand.
3. Lack of Market Knowledge
This is another area that tends to befuddle the average flipper who has never taken on this task before. Sure, the property might be great. There could be a ton of potential there. But what about the marketplace itself? There is much to be learned about the local off-market property marketplace that is being considered for the house flip. This is the knowledge that tends to be accrued with experience.
No first-time flipper is going to have the same level of knowledge when it comes to the marketplace as an experienced flipper. The latter group has taken the time and effort to learn the region. They are able to make investments with a much stronger idea of what their potential return is going to be. The guesswork has already been removed from the process naturally.
There are a million and one reasons to get into house flipping. It is a smart impulse on its face. Those who are looking to get into will want to make sure that they are providing themselves with a solid support system and creating an environment that is conducive to success. This is what allows first time flippers to overcome the usual pitfalls.
Note: We always recommend to use a professional house flipping software to avoid costly mistakes in your cash flow projections.