Is House-Flipping Worth the Money?
If you love interior design, DIY projects, and the thrill of a good return on investment, you’ve probably explored buying distressed properties, rehabilitating them, and reselling them for a tidy profit. There has certainly been enough television programming on the topic to pique your interest. But between capital investments and the often-unexpected variables involved in rehabbing a house, attempting to flip a house could leave you landing on your head. Weigh these pros, cons, and alternatives and determine whether house-flipping is worth the money to you.
Why You Should
The biggest reason to go into house-flipping is the cash. A well-flipped house can net sellers five figures of profit in a short amount of time. If you feel unfulfilled at the office, working with your hands to create something of value can be intensely gratifying. You can later apply the lessons you learn in construction and design to your own home, making it beautiful and even supplementing its own resale value.
Why You Shouldn’t
House-flipping is an investment, and all investments involve risk. This particular investment carries several risks that can offset or even threaten the high reward of a big sale. The biggest one is the possibility that the house simply doesn’t sell for as much as you had hoped, requiring a deep discount just to finally get the property off your hands. Increases in property value and capital gains taxes can be so onerous as to make the whole undertaking a wash. And the high stress that accompanies such a big, high-stakes project can jeopardize your physical and mental health.
An Alternative Path
Operating at a slight remove from the real estate transaction can be a win-win situation—if you have the money. By giving a hard-money loan to a house-flipper, you guarantee one of two outcomes: your lender will pay you back with interest, or the lender will default on the loan with the property as collateral, giving you a house to flip for yourself. These loans can be useful ways to build your retirement. But if you do wind up with the deed to a property you don’t want, be prepared to recoup your investment one way or another, whether by promptly reselling the house or by finally exploring some fix-up opportunities yourself.
So is house-flipping worth the money? If you approach it with a true love for homes and not with a get-rich-quick scheme in mind, house-flipping can be a worthwhile pursuit. If you’re not doing it for the right reasons or if you’re in a neighborhood or region where making the metaphorical chicken salad simply isn’t possible, it’s best not to try. If you’re in it for the money, other real estate opportunities and lending avenues may be the better bet—and you won’t have to roll up your sleeves.