Why You Won’t Get Rich Flipping Houses

So you’ve just moved into your new digs at Catalina Crossing and you’re kicking back and seeing what’s on the flat screen. Why not tune in to one of those house flipper shows?

After all, while you may be living large, a little extra coin can never hurt. What about a house flipping side hustle?

Recently, an article in the Washington Post outlined why this might be harder than it looks. In other words, don’t try this at home. Here’s a summary:

1. High costs. No matter how handy you are, there’s a matter of pulling permits and getting the right experts to help you out. That means licensed plumbers and electricians and that’s going to be expensive. Never mind the high costs to buy the place in the first place, in addition to hiring the help, there’s materials cost too. Not cheap.

2. High transaction costs. There are brokers fees, interest carrying costs, transaction taxes and other charges. All of them eat into your profits.

3. Believe me, I know about this one. At Decker Properties, we’ve remodeled plenty of apartments into new construction condition, such as the Skyview Apartment in Little Chute. It always seems to take longer and cost more than you think.

4. High costs can mean low margins. It won’t take more than a few surprises to turn your gain into a loss.

5. Time consuming. Even if you’re not doing the work yourself, it’s still time consuming. Meeting with contractors, picking out materials, etc.

6. Hard to delegate and scale. Someone needs to find the house, line up financing, get the bids and decide on design. All of these choices are imperative to success, so it’s hard to delegate any of it, which also makes it hard to scale.

7. It’s knowledge demanding. You need to know something about construction, the market specifics of your flip, business law and real estate law. It’s not impossible to become competent at all these things in time, but the first few days, or more likely years, are going to involve some hard knocks.

Then there’s one last caution that wasn’t in the article. If house flipping was easy and profitable, every remodeling company in the world would be doing it. After all, they’ve already mastered most of the quandaries above. But they’re not doing it. When the experts are avoiding the “opportunity,” that should give you pause.

Also see “The Worst Investment that You Will Every Make”

Leave a Reply

Your email address will not be published. Required fields are marked *