The Pros and Cons of House Flipping

House flipping is trending hot. In 2021, more than 323,000 homes got significant upgrades — the most homes flipped in a single year since 2006 and an impressive increase of 26% compared to 2020. If house flipping for profit has you seeing dollar signs, your next priority should be to weigh the pros and cons of house flipping.

Let’s explore how you can be on the receiving end of more profits and fewer headaches.

What is House Flipping?

House flipping is the process of purchasing a property, making improvements, and selling it for a profit. Investors often look for properties priced under market value, but could fetch a higher price if the home were upgraded. Homeowners are often willing to sell prices for less money to avoid having to make those costly repairs themselves.

Flipping houses can be a great way to earn money in the real estate market, but it does come with some risks. Before you start flipping houses, it's important to do your research and understand the process.

House Flipping Benefits for Investors

House flipping offers a ton of financial benefits, whether you want to make extra money in real estate or make flipping your full-time business. Despite there being other ways to dip into real estate investing, here’s why more people are finding favor with house flipping:

High ROI Potential

It’s a fact: you can make a lot of money flipping homes. With the right property, you can sell it for much more than you paid for it. This can provide a significant return on investment. And you’ll see an ROI faster when you can make efficient upgrades in a timely manner. The average ROI on a house flip last year was about 32%, or roughly $67,000 in profit.

Easy to Start Flipping

You can get started with relatively little money. You don’t need to have a lot of cash on hand to buy a fixer-upper and then sell it for a profit. This makes house flipping an attractive option for those who don’t have a lot of capital to invest.

Ongoing Income

With many of America’s homes aging, house flippers are seeing no shortage of properties to upgrade. About 30% of homeowners have reported a home improvement project in 2019. Millions of homes will need electrical upgrades to accommodate advancements like solar power and EV charging stations. There’s truly never been a better time to make enhancements to undervalued properties and prepare them for the next generation.

Potential Downsides of House Flipping

When it comes to house flipping, there are a number of potential cons that investors should be aware of.

Fluctuating Market Conditions

The real estate market can change on a dime, which can make it hard for flippers to plan ahead. You might buy a property with the intent to finish the flip within 3-4 months. But by the time it’s completed and ready for resale, demand or pricing may look different than it did when you started.

This is why it’s important to know the market well and have trusted professionals who can help you plan ahead for potential fluctuations. An experienced real estate pro may be better able to anticipate potential issues.

Potentially Lower Selling Price

One of the biggest risks is that the property may not sell for as much as you hoped, leaving you in a difficult financial situation. This can be due to a home’s valuation coming in lower than expected or not being able to find a buyer with deep enough pockets, for example.

Time-Consuming Delays

It can be very time-consuming and expensive to renovate a property, especially if unforeseen problems arise. For example, the appliances you ordered might experience shipping delays. Or a contractor may have to call out due to illness. This can quickly eat into any profits you hoped to make. You can reduce the potential for delays by having a great network of contractors and real estate professionals.

How to Flip a House with Confidence

The potential for house flipping can far outweigh any cons, but you need to be prepared and able to handle issues if they arise.

At Hamptons Flips, we’re helping real estate investors like you take the worry out of house flipping. We help you vet properties for sales that have high ROI potential and can be flipped quickly and confidently.

We specialize in a passive income real estate model so that once your flip is complete, you can keep generating revenue to fund your next one — and the lifestyle you’ve always wanted.

Get in touch to see how it works!