4 Dangers of Flipping Real Estate
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| 4 Dangers of Flipping Real Estate |
If you've just acquired real estate as an investment, you're not alone. According to recent studies, up to 25% of these transactions are made by individuals who intend to use the home only for financial reasons. If you want to "flip" the home, you need to be aware of four factors that might reduce your earnings.
1. Property Taxes
Keep the property for a few years, and you may see an increase in property taxes, particularly if your taxes are reevaluated during that period. In some hot real estate areas, taxes have virtually doubled in only five or six years.
2. Renovation Expenses
You may have acquired a "fixer-upper" for a low cost. Will you be able to recoup your spending and turn a profit after your project is completed, particularly if the value of your refurbished house exceeds that of your neighbors? Furthermore, can you sustain a real estate price correction?
3. Insurance and Mortgage Costs
You will pay extra for homeowners insurance if you do not live in the house and have renters. If you are financing the house, you are aware that your mortgage rate has increased as well.
4. Rental Pressures
A saturated rental market will result in lower rents than you had planned for. Some markets need specific licenses to be a landlord. In other markets, renters' legal rights may require a protracted and costly struggle to remove a problematic tenant. Will the decreased income levels combined with the additional costs depress your investment?
Of course, you may reduce your risks [and expenditures] by doing the bulk of the repairs yourself, appealing excessive property tax hikes, and locating a trustworthy and reliable renter. Flipping a house is not simple, but with hard work and persistence, you may make significant gains.
Of course, you may reduce your risks [and expenditures] by doing the bulk of the repairs yourself, appealing excessive property tax hikes, and locating a trustworthy and reliable renter. Flipping a house is not simple, but with hard work and persistence, you may make significant gains.
Summary:
If you've just acquired real estate as an investment, you're not alone. According to recent studies, up to 25% of these transactions are made by individuals who intend to use the home only for financial reasons. If you want to "flip" the home, you need to be aware of four factors that might reduce your earnings.