Flipping properties is a much different approach to investing than the buy-and-hold strategy. When flipping a property, the investor plans to improve and immediately re-sell the property.
Flipping can be very risky for those who are not experienced in construction and real estate. Repair and remodeling costs can easily spiral out of control, and the unknown or unexpected costs can burn through whatever profits the investor was expecting.
The most common problems with flipping are: unexpected repairs, greater than anticipated holding costs, and the possibility that the house does not sell for as much as anticipated.
To minimize your risk when flipping a property, make sure to buy the property for the lowest possible price. Get several estimates for each phase of the job and add 25% to those prices to cover cost overruns. Then consult a Realtor for a projected market value of your property after repairs are completed.
If you're new to rehabilitating properties, consider living in the property and fixing it slowly over time with cash. This will help you get more comfortable with the flipping process and will substantially reduce your total overhead.
