3444 Mountain Tyme Way, Sevierville, TN

OFFICE PHONE: 865-774-7764
eMail: info@easttnexperts.com

We service ALL areas of East Tennessee!
We can also show and sell ANY property in Tennessee!

Our Featured Properties

Friday, January 1, 2010

Five mistakes that make house flipping a flop

Do your research and make sure you have what it takes before you try to turn a profit with real estate.

By Lisa Smith of Investopedia

Five mistakes that make house flipping a flop (© Myron Jay Dorf/Corbis)

more on Investopedia.com

·         7 tips on buying a home in a down market

·         6 tips on selling your home in a down market

·         Home renovations that don't pay

House flipping has become the day tradinghttp://images.intellitxt.com/ast/adTypes/2_bing_11pxw.gif of the 2000s. But in the rush to make a profit, far too many would-be real-estate moguls overlook the basics and end up failing. Here are the five biggest mistakes investors make in this market and how to avoid them.

1. Not enough money
Dabbling in real estate is an expensive proposition. The first expense is the property acquisition cost. While low- and no-money-down financing claims abound, finding these deals from a legitimate vendor is easier said than done. Also, if you're financing the acquisition, that means you're paying interest. Although the interest on borrowed money is tax deductible, it is not a 100% deduction. Every dollar spent on interest adds to the amount you will need to earn on the sale just to break even.

Paying cashhttp://images.intellitxt.com/ast/adTypes/2_bing_11pxw.gif eliminates the interest, but even then, there are costs to holding a property, such as taxes and utilities. Renovation costs must also be factored in. If you plan to fix the house up and sell it for a profit, the sale price must exceed the combined cost of acquiring the property, holding it and renovating it. Even if you overcome these hurdles, don't forget about capital gains taxes, which will chip away at your profit.

Read:  House flipping makes a comeback

2. Not enough time
Renovating and flipping houses is time-consuming. It can take months to find and buy the right property. Once you own the house, you'll need to invest time to fix it up. Before you can sell it, you'll need to schedule inspections to make sure the property complies with applicable building codes. If it doesn't, you need to spend more time and money to bring it up to par. Next, you'll need to invest time to sell the property. If you show it to prospective buyers yourself, you'll spend plenty of time commuting to and from the property and meeting with potential buyers.

If you are able to make a 10% profit on a house that cost $50,000, you'll make a $5,000 profit. For many people, it might make more sense to get a good job, where they can earn that kind of money in a few weeks or months via a steady paycheck -- with no risk and a consistent time commitment.

Bing

House-flipping tips for beginners

3. Not enough skills
Professional builders and skilled professionals, such as carpenters and plumbers, often flip houses as a sideline to their regular jobs. They have the knowledge, skills and experience to find and fix a house. Some of them also have union jobs that provide unemployment checks all winter long while they work on their side projects.

The real money in house flipping comes from sweat equity. If you're handy with a hammer, enjoy laying carpet, can hang drywall, roof a house and install a kitchen sink, you have the skills to flip a house. On the other hand, if you have to pay a professional to do all of this work, the odds of making a profit on your investment will be dramatically reduced.

House Flipping Back?

View more MSN videosGo to CNBC

4. Not enough knowledge
To be successful, you need to be able to pick the right property, in the right location, at the right price. In a neighborhood of $100,000 homes, do you really expect to buy at $60,000 and sell at $200,000? The market is far too efficient for that to occur frequently.

Even if you get the deal of a lifetime, you need to know which renovations to make and which to skip. You also need to understand the applicable tax laws and know when to cut your losses and get out before your project becomes a money pit.

5. Not enough patience
Professionals take their time and wait for the right property. Novices rush out and hire the first contractor that makes a bid to address work they can't do themselves. Professionals either do the work themselves or rely on a network of prearranged, reliable contractors.

Novices hire a real-estate agent to help sell the house. Professionals rely on "for sale by owner" efforts to minimize their costs and maximize profits. Novices expect to rush through the process, slap on a coat of paint and earn a fortune. Professionals understand that buying and selling houses takes time and that the profit margins are sometimes slim.

Bottom line
Before you get involved in flipping houses, do your research. Like any other business venturehttp://images.intellitxt.com/ast/adTypes/2_bing_11pxw.gif, flipping requires time, money, patience and skill, and it will definitely be more difficult than you imagined.

 

 

 

 

10 comments:

  1. It's really very difficult in this full of activity life to listen news on Television, therefore I simply use web for that reason, and take the hottest news.

    My blog ... Home Staging Company

    ReplyDelete
  2. I could not resist commenting. Perfectly written!



    Also visit my weblog: Buy green tone pro

    ReplyDelete
  3. This article is in fact a fastidious one it assists new net
    users, who are wishing in favor of blogging.

    Here is my page 1285muscle supplement

    ReplyDelete
  4. I like the valuable info you provide in your articles.
    I'll bookmark your blog and check again here regularly. I am quite certain I'll learn plenty
    of new stuff right here! Good luck for the next!



    Check out my web page :: Buy Pure garcinia cambogia

    ReplyDelete
  5. WOW just what I was searching for. Came here by searching for natural male enhancement

    Check out my weblog :: Vimax Male Enhancement Reviews

    ReplyDelete
  6. Ridiculous quest there. What happened after? Good luck!

    Here is my homepage - tom ford and partmer

    ReplyDelete
  7. Hi, of course this paragraph is actually fastidious and I have learned lot of things from it about
    blogging. thanks.

    Look into my page ... Buy sytropin

    ReplyDelete
  8. Fine way of telling, and nice article to get information concerning my presentation
    subject, which i am going to deliver in college.


    Also visit my web-site ... pure garcinia cambogia reviews

    ReplyDelete
  9. This paragraph is actually a fastidious one it assists new the web viewers,
    who are wishing for blogging.

    my page - Ripped Muscle Extreme Reviews

    ReplyDelete
  10. Greetings! Very useful advice in this particular post! It's the little changes that will make the largest changes. Thanks for sharing!

    Here is my page: Buy Pure Raspberry ketone

    ReplyDelete

East Tennessee Realty Group loves to get feedback from our readers. Please leave us your comments or feel free to email us at info@easttnexperts.com.