The Pros and Cons of Flipping Houses

Flipping houses is a great way for investors to make money. With the rising price of homes, flipping has become more attractive for investors. The process of flipping can be broken down into four steps: find house, buy house, renovate house, sell house. Simple enough right?

But what are the pros and cons of house flipping you should know before investing?

Pros

Make Money Quickly

There are many benefits to flipping houses. Firstly, there is an opportunity to make a lot of money; on average, most people make around $40k in profit on each flip. 

If you can pick up a house at a bargain price, renovate it and sell it at a higher price in a short period of time, you can easily make good money with a good flip.

Tax Benefits

Secondly there are tax benefits. One of the tax benefits of flipping houses is that the house generates capital gains which are tax-deductible. This benefit helps you pay less in taxes and get more savings than if you were just renting out your property. 

While certain tax benefits vary from state to state, you can expect to see benefits such as deferring taxes until the house is sold and making money off of depreciation. 

Easy to Get Started

Another reason why flipping homes is beneficial is how easy it is to get started in this business. Most think that you need an experienced background in real estate or investing but truly, it doesn’t require much experience at all. If you feel more confident in flipping houses by hiring certain professionals such as a real estate agent or a contractor, you can very well do this and still make money.

Take Advantage of the Real Estate Market

Finally, people can take advantage of the booming housing market at this time and potentially experience significant growth in their investments over time, which would not be possible with other types of investments like stocks or bonds which generally take years to see an exponential increase.

Cons

Can Have High Risks

The process of flipping houses is risky because you are not building anything new. Instead, you are buying old properties and fixing them up before selling them. If you buy the wrong property, then it would be very difficult to sell it at a profit. You could end up with a house that is too expensive to fix and too inexpensive to warrant buying for the sole purpose of fixing it up and reselling it at market rate.

Increased Competition

An additional challenge is that there are many other people who are doing the same thing as you and trying to compete with you for deals. This can make it difficult to turn around your properties quickly and make good money on it because everyone else will be trying to do the same thing.

Start Flipping

One of the biggest benefits of flipping houses is that there are many ways to do it. You can flip a house as an investment, as a business or for profit. If you’re ready to begin flipping homes, start with educating yourself on the entire process. Don’t forget about when it comes time to sell the property that there will be additional costs you will be seeing as a seller. Utilizing a seller closing costs calculator will help you better understand what to expect.

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