Common Risks Faced by Property Flippers

The first thing that should be noted is that flipping houses is a great way to bring home

a rather large profit in a relatively short amount of time when doing so in a seller’s market so to speak.

The problem is that we currently seem to be experiencing what is known as a buyer’s market

from one end of the United States to another.

Foreclosures are at an all time high, which means that the market has suddenly been saturated with properties for sale.

While this is excellent news (believe it or not) when it comes to getting your hands on a property at a lower price,

it also makes a difficult time convincing buyers to pay top dollar when there are better bargains down the road.

This is one of the primary risks involved in the real estate investment venture known as Property Flippers.

The massive profits that most investors seek cannot be accomplished if the property cannot be purchased, rehabbed, and sold quickly.

Unfortunately, at the moment, very few properties in any city are selling too terribly quickly.

The worst case scenario in a situation like this is that

you are forced to either absorb the loss (which can in extreme cases result in serious financial hardship or bankruptcy) or

rent the property out (which will in most cases negate all the efforts that were made to rehab the Property Flippers.

An inability to sell the property that is being flipped is probably the worst fear of every Property Flippers

who engages in this sort of investment. In these cases, it is often better to drop the price and

take a loss than hold out for a better price risking further losses in the future.

These are not the only risks associated with flipping properties, unfortunately.

Another risk would be the risk of seriously underestimating the amount of money

that will be required to do the necessary work.

This is something that many first time investors find is a fairly common occurrence.

Most people have unrealistic expectations of exactly how far their dollars will go

when it comes to investing in the materials and labor needed to rehab a property properly.

Even minor cosmetic repairs throughout a house can easily run into several thousands of dollars to repair.

The flip side is that once these repairs are made the potential profits run into several tens of thousands of dollars.

Another risk that isn’t often considered is the risk of overestimating abilities.

This is one risk that costs not only precious time but valuable money as well.

Not only is material wasted in the process of discovering you aren’t exactly skilled in any particular tasks but also there are further expenses (often unplanned) involved in hiring the professional to repair the damage and replace the material that was wasted.

When in doubt, it is almost always best to hire a professional if at all possible.

This also leads to missing deadlines, going seriously off schedule, and adding yet another mortgage payment (if not more than one) to the overall price of the project.

The final risk is often something that simply cannot be seen or anticipated.

This was experienced in the days immediately following 9-11 and should not be forgotten.

The unforeseen happens every day.

Markets crash; local economies can be devastated by the announcement of a major employer that it is going out of business (think of the collapse of companies such as Enron and World Comm and what they did to local economies).

In these instances, the market will take quite a while to recover from the shock to its system, and ‘flippers’ among other investors are often left feeling just as lost and devastated as those who were victimized by these companies through no fault of their own.

Stuff happens and those things that we have no control over are almost always the things that affect us most profoundly.

The same holds when it comes to Property Flippers.

The state of the economy, the housing market in an area, and sudden announcements

that affect either can often have the most profound impact on those

who are investing in Property Flippers in those areas whether for better or for worse.

The trick is in deciding which risks are acceptable.

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