Flipping: Not as Easy as it Sounds
In the past, "flipping" properties has seemed to to be the path to quick wealth, much like the "dotcoms" were in the previous decade. Having attempted a few of these in the past, I can tell you that making money on a flip was never as easy as it looked in the first place. Now, with the real estate market in flux, flipping can be even more uncertain.
Like the weather, flipping seems to be something everyone talks about, but few actually do... and even fewer do well. My experience is that whatever you estimate it will cost to fix up the property, in fact will end up costing you twice as much. Whatever amount of time you estimate it will take to rehab, it will take twice as long. However long you think it will take to sell, double it.
Every time you tear something out to repair or replace, you are likely to find something behind or underneath that also needs repair. Replacing a commode can reveal a rotten floor covering. Removing the floor covering can reveal rotting subfloor.
Some investors have subscribed to the Greater Fool theory: that no matter what you pay, there will always be a Greater Fool in the wings waiting to buy your property. Now that the market has contracted, the supply of Greater Fools can no longer be counted on to bail you out. Some of us turn out to be the Greater Fools ourselves, stuck with properties for which we overpaid in the hopes of a quick turnaround.
There will always be opportunities for bargains, even in the worst of times. Baron Rothschild advised buying "when blood is in the streets", a literal reference to the French Revolution. But the Baron's success involved being able to hold onto assets long term until the time was right to sell. Flippers looking for quick profits don't have that luxury.
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Brian Schulman offers expert real estate representation for buyers and sellers of homes in Lancaster County, PA. To learn more, visit http://www.FindLancasterHomes.com/ |
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