What is house flipping

Houseflipping

The principle: you choose a run-down property and buy it. The saying “buy the ugliest house on the block” is always going around here. Then the house is renovated and sold again for a profit.

Risks

The recipe sounds incredibly simple, but the dangers shouldn't be ignored. Here are some of them:

  • hidden defects that are not visible at first glance and can make the renovation (the flip) considerably more expensive, so that in the end only a small profit comes out
  • Overpayment of the purchased property
  • too optimistic sales expectations for the property
  • too optimistic assessment of the overall market
  • Overestimation of one's own abilities for a professional renovation
  • Underestimation of material and labor costs
  • Overestimation of one's own creditworthiness with the banks
  • wrong assessment of American taste in terms of home furnishings and equipment details.

So there are numerous dangers lurking. You need reliable craftsmen, a good schedule (not too short) and the money to survive a longer period of time - if the property cannot be sold straight away.

Renovation, yes, but how?

Another very important point is that you shouldn't necessarily be guided by your own taste: "You built, what people want, not what you like". So you should be clear about how you want to renovate the respective property before renovating.

The dangers are even greater in the current cooling real estate market in the US. If a completely renovated house waits too long for a buyer, the expected profit melts away very quickly, e.g. in the form of loan payments to the bank. One of the biggest mistakes is to assess the renovated property too optimistically with regard to the selling price and to offer it too expensive on the real estate market.

An overview of the current real estate prices is available at www.zillow.com. The approximate real estate prices in your residential area can be found here. There is a good article on the subject at: money.cnn.com.

This article is an excerpt from Live and work in the U.S.

By Just Landed

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