Common Misconceptions About House Flipping

Los Angeles private money lender
You've probably seen at least one episode of a home makeover show on HGTV. There's no denying the role that network has played in motivating regular folks to get into the business of buying distressed houses, renovating them, and selling them. The reality is a bit more complicated than these TV versions of real life would suggest. In fact, there's a lot about flipping houses that the average investor probably doesn't know. We'll touch on a few of the common home flipping misconceptions below.

It’s easy to flip houses

We have real estate TV shows to thank for fueling the idea that it's possible for anyone with a contractor and a sense of design to flip a house. The truth is, flipping a house can be a big challenge. Just for starters, a contractor may not show up, or an insurance claims adjuster may not get back to you in a timely fashion. These are the kinds of things that can derail your project pronto. And of course there's always the possibility of hidden problems and repair costs. Problematic septic systems, rotten trusses, and unstable foundations can eat your profits alive if you’re not careful. Every second of wasted time is another mortgage payment that you will be responsible for making.

A house flip can be done quickly

On the small screen, home improvement gurus flip a house in a month or two, but Rudderow says house flipping can be an extremely complicated process, and sometimes a time-consuming one as well. You have to deal with homeowners insurance, taxes, utilities, permits, inspections, appraisals, title insurance and closing costs, possible HOA fees and special assessments, liens, insurance claims, shady contractors, materials being delivered late or incorrectly, and much more. Experts can fully gut and flip a house in a month or two, but it's because they have plenty of knowledge and experience under their belt.

Flipping houses is a way to get rich quick

Flipping houses can help you build wealth, but it's not a path to immediate profitability. It normally takes first-time home investors much longer than they expect to complete a quality renovation, and they often make the mistake of forgetting that they will have to carry costs during the remodel. Those costs include the actual price of the home, closing costs, and renovations. You need to be prepared for the reality that you can actually lose money on a deal if surprises come up.

More money, more profit

This one is pretty simple...the more expensive a property becomes, the more limited your buying demographic becomes, and this can mean longer holding costs. Flipping the most expensive home may not always mean the most profit in the end.

You need loads of cash to flip a house

Yes, an unlimited budget will make flipping easier, but that doesn't mean you need a boatload of cash to pull off a successful flip. Loans can come from a bank, mortgage broker, or private lender. In fact, some first-time investors borrow the money from friends or family. That's because people without house-flipping experience may have a more difficult time getting financing from certain lenders.

At CIVIC, we deliver fast, honest, simple lending for real estate investors. Whether you're an experienced investor or a first-time borrower, we are here to help you break through traditional lending barriers to unleash ever-increasing success. To speak with one of our private lending experts, contact us today at 877-472-4842.

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