The Risk of House Flipping
House flipping is basically purchasing a house or property with the intent to sell it for a profit. However, there are a lot of decisions to make and it can get pretty complicated. House flipping is also very risky and depends on the real estate market. During a slow period, fixed-up homes can sit on the market for months. But during a boom, flipped homes can almost name their price in some areas.
Flipping can be a legal and ethical practice when all descriptions of the property condition and value are true and accurate. However, flipping can also be an illegal fraud-for-profit scheme that may lead to devastating consequences. In this case, the flip usually involves a fraudulent appraisal, which would show that renovations were made to the home, when they weren’t, or that the renovations consisted only of minor cosmetic improvements.
The first thing you need to figure out is where you should buy. If you buy in an up-and-coming neighborhood, you’re hoping that the neighborhood increases in value. If you buy in a new development, you’re hoping to attract higher-end buyers who want the luxury features and space offered in the suburbs. If everything works out, you’ll make a nice profit. But if something goes wrong, such as faulty budgeting, timing issues, or a crime spike in that up-and-coming neighborhood, you’ll be stuck with a house no one wants to buy.