Thanks to the seemingly endless glut of home improvement TV shows like “Flip or Flop,” “Masters of Flip,” and “Rehab Addict,” it seems like flipping houses has become America’s favorite pastime.
But for the inexperienced, house flipping can be a dangerous and costly game. Make one wrong move, and that “great investment” can turn into a monumental mistake.
Don’t want your first flip to be a flop? Here are five questions you might never think to ask yourself, but totally should, before you begin flipping houses.
1. Do I have a great house flipping team?
Buying and flipping a house isn’t a one-person job; it’s a team sport, and you need to surround yourself with the right players. This starts with having a savvy real estate agent who can help you not only find a great investment opportunity but also negotiate a great deal on the property. Buy low, and things are already looking up!
You also need home improvement professionals who can guide you through the remodeling process and help you set a budget, determine what renovations to make (some yield a better return on investment than others), and solve any issues that crop up during construction.
Typically, you want to hire a general contractor, a person who's responsible for providing all of the laborers, building materials, and equipment necessary for the entire project.
2. How long will it take to flip this house?
Ideally, you want to buy a house that can be renovated within four to six weeks, says Bobby Curtis, a real estate broker at Living Room Realty in Portland, OR.
A short turnaround time will help you keep costs like interest and taxes to a minimum.
On average, homes take about 180 days to flip, according to ATTOM Data Solutions, curator of a nationwide property database. But flipping a house can take a lot longer. After all, there’s no telling what you’ll find when you start tearing down walls.
Mold could be lurking behind drywall in a basement, or there could be electrical issues beneath the surface, warns J.B. Sassano, president of Mr. Handyman, a national home improvement company based in Ann Arbor, MI.
Also, depending on the housing market, it may take you a while to find a buyer once the home is fixed up.
The moral of the story: Patience is more than just a virtue for house flippers—it’s a requirement.
3. Am I putting too much at risk?
Although there are a number of loan options for house flipping, many first-time house flippers stretch themselves too thin when it comes to how much of their money they invest in a project. Some even put their entire retirement savings or child’s college fund on the line. Not a great idea!
It’s important to truly assess your risk tolerance. Depending on where you are financially, you may or may not be a good candidate for flipping houses right now.
4. Can I think like an investor instead of a homeowner?
When flipping houses, you have to keep future home buyers in mind. While it may be tempting, the last thing you want to do is make home improvements and design decisions that reflect your personal tastes instead of what most home buyers want.
Be prepared to choose home features and housing materials that are classic and offer wide appeal. If you can’t commit to doing that, flipping houses isn’t the right endeavor for you.