Risks and Benefits
Some might call house flipping a fad. Others will say it is a foolish "get rich quick" scheme. Still others will tell you it is a viable money-making business with great potential. In any event, it is a real business with opportunities to make a lot of money – or, conversely, lose a lot.
As with the risks or benefits of any business, the more invested, the more the potential profit or loss. One aspect of house flipping that is certain is that the one sure way to make money is to sell a system or book that teaches others how to do it.
The most obvious risk to flipping houses is that an investor will lose all the money put into buying a property. This is somewhat unlikely since real estate is a fixed commodity and, unless the house burns down and the lot gets repossessed, there will be something of value that is owned regardless of the investment. Therefore, the first caveat of house flipping is to make sure the property being bought actually exists – do not buy any swamp land in Florida, or the Brooklyn Bridge.
Another risk is that the bottom will fall out of the real estate market and there will be no one willing to buy the property once it has been purchased for resale. With the state of the real estate market today, that also is somewhat unlikely. An associated risk is that someone will pay too much for the house and not be able to make a profit on the resale.
The major benefit of any type of business is the profit to be had. If even half the claims of those selling house flipping systems can be believed (and that might be a risky percentage), then this business has great potential. These financial benefits come in two categories – one, the profit that comes from a quick purchase and resale of an undervalued property and, two, the profit that can be realized by renovating a house and selling it for the increased price it will command.
There also are some intangible benefits. House flippers can be their own boss. While any business will require more time and effort than some would like to put into it, working for oneself can be very satisfying. If the flipper also is a renovator, there is the added benefit of taking a house and making it into a show place.