The Cost of Flipping Properties

05 August 2016

Flipping properties is becoming a hobby for more and more people and that is a scary thought. So what do we mean by flipping? You buy a property, do some minor or major renovations and sell it 6-12 months later.

Sounds simple enough, but here is the reality, flipping properties only works in a rising real estate market. When prices cease to increase by 10% per year, it will end and fail badly for the inexperienced. Here is why;

  1. A flipper has to buy first, there are legal and land transfer costs.
  2. Next, they have to carry a property at a cost of 1% per month.
  3. Then, when they sell it at the end, they have more closing costs and commissions.

Now let's say you spent $50,000 in renovations. Do you really think someone is going to pay you $100,000 for the same renovations? No! You would be happy to get the $50,000 back. However, if the property has gone up by $100,000 in a year, then you're OK.

You also may think that you're really smart...which you're not.