Flipping is a type of real estate investment where you purchase a revenue-generating asset, mostly old properties that have the potential of value appreciation through renovations and remodeling. It is also known as a form of wholesale real estate investing in which investors don’t purchase a property for themselves, instead, it is for commercial purposes.
Benefits and Risks of Real Estate House Flipping
While house-flipping can be very beneficial, like any other investment it has some pros and cons as well, always weigh these out before moving forward with your investments.
Benefits of House Flipping
Good potential for profits
Flipping homes, as mentioned before, are very lucrative businesses when approached as full-time businesses. As real estate properties are in very high demand, the right approach and actions can make significant returns.
House flipping can only be beneficial when you have good negotiation skills as you need to buy resources at a low price and sell it off at the highest rate possible. Regular interactions with realtors and manufacturers can also help better your negotiation skills. It can be a great way of learning and developing the ability to delegate tasks, manage time and interact with people.
Apart from the high returns in form of the selling price, real estate investing in flipping houses can be very rewarding in many other ways as well. When you renovate an old property, you are giving it a new life, it is like reusing an old object, this way you also save a lot of resources, infrastructure, and land from becoming useless. You can also improve the quality of life around the properties you rebuild.
Risks Associated with House Flipping
Chance of substantial monetary losses
When you make a large investment for better returns, there is always a possibility of losses. Hence it is advisable to invest as little as possible in purchasing a property as unanticipated expenses can arise anytime. Also, fluctuations in the market can build a lot of stress when it comes to reselling your property and if you are unable to sell your home at the earliest, you will have to keep paying the holding costs of your property which includes the mortgage.
Try purchasing properties in auctions and foreclosure, also it is advised to keep an eye on the market trends and get your property out at the most opportune time.
There is a fat chance that things might not go exactly the way you planned, and then stress can build around that because your investment is so huge.
Challenges associated with house flipping in India
House flipping is a very new idea in India, and creating awareness around flipping as a great investment option and also a way of reusing old properties can be really tough in the beginning.
How to finance a house flip?
We might have seen houses flipping or reinventing restaurants on television before, but it isn’t always as easy in real life as it seems on TV and one of the biggest obstacles between you and your dream flip is financing the sale as house flipping entails purchasing inexpensive homes, fixing them up, and reselling them at a good price. While the whole fix and flip idea is very lucrative, it still demands a lot of money.
Especially in the current Indian scenario, there aren’t any lenders who will offer mortgages for a house flip, and in that case, one might have to turn to hard money loans as a final resort. These are short-term loans from private lenders, as these come with up to 15% interest rates, you should consider all different aspects before borrowing money.
If you have a property under your name, you can consider getting a home equity loan as well. But in the end, if you decide to finance your house-flip through a loan, consider all costs, fees and expenses you will have to incur before moving forward with it.
If you are an investor that doesn’t want to take out a loan but still wants to earn from the fix-and-flip investment, it might be difficult but never impossible for you. Build your wealth through different highly lucrative investment options to build a large corpus of assets.
Assetmonk is a WealthTech platform that understands the importance of financial stability and we also have several tried and tested ways of investment to earn high returns to fulfill your long-term and short-term goals.
Fractional Ownership of Real estate and Crowdfunding are some highly liquid modern-day real estate investment options that you can go for to build your capital for the next big investment while also enjoying the perks of the property ownership at affordable costs. Get in touch with the advisors at Assetmonk for all the help.
Is property flipping possible in India?
More than 70% of millionaires in the world have made their money through some form of real estate investment, so real estate might be a very profitable proposition, and flipping properties can be a big win in India.
But as for now, property flipping is still a very underexplored and obscure concept of limited means in India. In contrast with its origination country America, India is still a developing economy with people only opening up to modern investment options now.
Indians might take some time to warm up to the option, but flipping properties, in general, is possible and can be very profitable for a developing country such as India as well.
