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To Flip or Not To Flip?

Posted by susan-adm on April 17, 2019
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Well it sure can be profitable but it appears times have changed and it’s not so easy anymore. Have you ever pondered it, the benefits of making some quick money on flipping a home? Those attractive renovation shows on HGTV with the popular duos like Chip and Joanne Gaines or the Property Brothers draw you in on the ‘before and afters’, right? Well, before we go any further, ‘flipping’ is a casual term for wholesale real estate investing. It’s a type of real estate investment strategy, when an investor purchases a property for a quick sale and profit, and not for use. Before jumping into this type of real estate, do your homework first. You know the term, “buy low, sell high”.

Experts these days say, hold on. It’s not as easy as it looks. Flipping homes may have been easier say, five years ago or more. Prices for homes in Ontario, especially in Ottawa have jumped and buyers have become far more educated. Many people who get into the business have a connection or knowledge of the construction industry aka, “sweat equity”. Cutting down on paying for labour and skilled jobs is a huge money saver. Many times someone involved in the flip has some knowledge in real estate. This industry has become a real business and hard for the smaller business person hoping to make money on a few homes over time.

Your first step in venturing into this high stakes business — know the right neighbourhood and get a knowledgable agent. Your realtor should know which neighbourhoods are turning over, the areas that are more profitable and where you should get the best bang for your buck. Remember different streets in a specific area matter just as much because of traffic, schools, and more.

The market for flipping homes has diminished on both sides the border. A 2018 CNBC report focused on the decline in flipping homes. It states… “Mark Bethanis, a contractor, has been flipping homes for 30 years. He usually does multiple properties per year, but this year he did just one.”
“It’s not only becoming more expensive on the purchase side of flipping, but it’s becoming more expensive on the fix-up side of flipping,” said Bethanis.”

When taking on this endeavour, timing is everything. As mentioned the term, “buy low, sell high” can be a challenge. When the market is in a downtime, it can last for months, and that cuts into your profit column. Unexpected or hidden costs creep in quicker than you think, such as utilities, property taxes, interest rate changes and insurance. Top them with mortgage payments and your capital is at risk. Certain neighbourhoods like Vanier and Hintonburg once had properties that could be flipped rather quickly but Ottawa’s strong market does not appear to be fading any time soon. There is less and less opportunity out there.

Remember, inspections are a must and sticking to building codes can get tricky. If there is an error or change needed, that is another unexpected cost. Once that’s done, selling the fixer-upper might take more time. There’s likely staging costs and time sitting on the market, depending on how fast it sells. If you plan to reconstruct or update the exterior of the home, question whether the work fits with the neighbourhood or compliments it.

It’s important to note that flipping a property can definitely be a great money maker if all goes well. The more you flip homes, the more you learn. Over time, you learn more about different neighbourhoods, other businesses and make good contacts/relationships. Another bonus, you learn how to manage your finances, problem solve and work out the surprise costs that may arise.

The bottom line? Be smart, do your research and appreciate all the factors when jumping into this kind of real estate. It takes time, money, and a good agent to assist in finding the right property. Good luck!

Contact us for expert advise before your flip becomes a flops. 

613-563-1717 or mail@susanchell.com

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