One of the hottest money making ideas in the U.S. today is property flipping for profit. Basically, the objective is to buy a property, fix it up and sell for a profit as quickly as possible. The big challenge is to purchase a house for an affordable price, spend a budgeted amount of money to fix it up to maximize attractiveness, and then place it on the market at a price that will allow you to make a profit. Some of the bigger mistakes people make are not accounting for certain expense items and other assumptions. Things like:
- 1. Assuming they are guaranteed a profit-this simply isn't true.
2. Exceeding their budget for fix up- this is common, especially when people are excited about finding a property with potential and look past obvious problems in their excitement to "do a deal".
3. Unforeseen problems that exist with the home they bought. All too often properties are "cosmetically" fixed up to hide bigger problems. If you are a buyer, look out! An uninformed buyer can find that they bought more trouble than they anticipated and actually lose money on a transaction.
4. How long it will take to sell the property. Every month that goes by is an expense to a property investor. There are mortgage payments, insurance costs, utilities and other expenses. Plan on having those costs for an extended period. If you sell it faster, good for you! If not, at least you have accounted for the long sales cycle.
5. Real estate commissions they often have to pay. These commissions and fees can often amount to 8% or more of the price of the home.
6. Mortgage payments that must be made during the holding period prior to closing the sale.
7. Maintenance costs, taxes, insurance and other miscellaneous costs can limit your holding power and as a buyer of such properties, you should understand what fix-up work has been done and what remains.
8. Go to www.homesmartreports.com for a flipping blog with more information.