4 Dangers In Flipping Real Estate
If you have recently purchased some real estate for investment purposes, you are in good company. According to recent reports, almost 25% of these purchases have been made by those whose intention is to use the property for investment purposes only. If you hope to “flip” the property there are 4 things you must be aware of that can put a crimp on your profits.
1. Property Taxes. You may experience a surge in property taxes if you keep the property for a few years especially if your taxes are reevaluated during that time. In just 5 or 6 years taxes have nearly doubled in some hot real estate markets.
2. Renovation Expenses. You may have purchased a “fixer upper” at a bargain rate. Once your project is complete will you be able to recover the expenses and make a profit especially if the value of your renovated property is above those in your neighborhood? In addition, can you withstand a correction in real estate values?
3. Insurance and Mortgage Costs. If you do not occupy the residence and have tenants then you will have to pay more for homeowners insurance. If you are financing the property then you will be mindful of the fact that your mortgage rate will also be higher.
4. Rental Pressures. A market that is saturated with rentals indicates that the rents you can charge will be lower than your expectations. To be a landlord in some markets it is essential for you to get special licensing. Legal rights enjoyed by tenants in other markets can be an indication of a lengthy and expensive battle in getting rid of a bad tenant. Will the lower income levels along with the added expenses pull your investment down?
Of course, you can limit your risks [and costs] by doing the majority of the upgrades yourself, appealing excessive property tax increases, and finding for yourself a trusted and dependable tenant. It isn’t easy flipping a home, but with a lot of pluck and determination it can result in strong profits for you.
Tags: flipping, real estate, Real Estate Investing, rehab homes