5 Reasons You Can’t Flip a Home

Posted on April 17th, 2015 | by      

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Good morning readers. Today’s Friday, and today’s blog is about investing, as my Friday blogs are. But this blog is a bit different since it involves flipping an investment house to make a profit.

I found an article on Investopedia that covers this topic.  But instead of giving you tips on how to flip houses to make a profit, it tells you the reasons why you may not make a profit when you flip a home.  Just take a look at the quote I have included below from the article.

1. Not Enough Money
Dabbling in real estate is an expensive proposition. The first expense is the property acquisition cost. While low/no money down financing claims abound, finding these deals from a legitimate vendor is easier said than done. Also, if you’re financing the acquisition, that means you’re paying interest. Although the interest on borrowed money is tax deductible, it is not a 100% deduction. Every dollar spent on interest adds to the amount you will need to earn on the sale just to break even.

Paying cash eliminates the interest, but even then, there are property holding costs, such as taxes and utilities. Renovation costs must also be factored in. If you plan to fix the house up and sell it for a profit, the sale price must exceed the combined cost of acquisition, the cost of holding the property and the cost of renovations. Even if you manage to overcome these hurdles, don’t forget about capital gains taxes, which will chip away at your profit. (To learn more, read Fix It And Flip It: The Value Of Remodeling.)

If you know what you are doing and what not to do when flipping a house, you can make money with investment homes.  Take a look at this article and you will find the mistakes that you should avoid when you are flipping a house.

I hope you found this article and that you will share it with your friends and family. Have a great day and stay tuned this weekend for my marketing blogs.  Have a great Friday and I’ll be back on Monday with more financial articles.

 

 

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