Flipping – 8 caveats before you get started

Flipping is the business of buying a distressed home at a low price, fixing it up, and then selling it for a quick profit.

1. Flipping homes is not as easy as flipping pancakes and definitely not as simple as those “Get Rich Quick” schemes make it appear.

2. Like any business venture, flipping takes time. It could take several months to find and assume the right properties.

3. Finding the properties that are below market value involves timing. Once you find those properties, you must move fast.

4. There’s a lot of competition out there. Even if you’re lucky enough to score a great deal on a depressed property, does your skill level match those of brokers who know the neighborhood and who’ve been in the biz for decades?

5. Purchasing a property with no money down is almost impossible. You will need serious cash to purchase the property, fix it up, and then pay the bills.

6. You can’t just trim the hedges and slap on a fresh coat of paint. Renovating and remodeling a home to sell is a science unto itself.

7. You will need to have the house for at least three months because of the Federal Housing Administration's anti-flipping regulations. This means that you will need money to pay for interest, utilities, taxes, and insurance while owning the house.

8. The IRS treats the buying and selling of real estate AS AN INVESTMENT in one way. It treats the buying and selling of real estate FOR BUSINESS in another. Taxes can get tricky, especially when you’re doing it as a business. You might end up paying more taxes than you bargained for so be prepared.

If you’ve carefully read all 8 caveats and you’re still itching to flip, then go for it! Flipping can be a highly lucrative profession.

Written by Melanie Siben

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