Common Risks Faced by Property “Flippers”

The first thing that should be noted is that flipping housesis a great way to bring home a rather large profit in a relatively short amountof time when doing so in a seller’s market so to speak. The problem is that wecurrently seem to be experiencing what is known as a buyer’s market from oneend of the United States to another. Foreclosures are at an all time high,which means that the market has suddenly been saturated with properties forsale.

While this is excellent news (believe it or not) when itcomes to getting your hands on a property at a lower price, it also makes adifficult time of convincing buyers to pay top dollar when there are betterbargains down the road. This of course is one of the primary risks involved inthe real estate investment venture that is known as flipping properties. Themassive profits that most investors seek cannot be accomplished if the propertycannot be purchased, rehabbed, and sold quickly.

Unfortunately, at the moment, very few properties in any city are selling too terribly quickly. The worst case scenario in a situation like this is that you are forced to either absorb the loss (which can in extreme cases result in serious financial hardship or bankruptcy) or rent the property out (which will in most cases negate all the efforts that were made to rehab the property. An inability to sell the property that is being flipped is probably the worst fear of every property investor who engages in this sort of investment. In these cases it is often better to drop the price and take a loss than hold out for a better price risking further losses in the future.

These are not the only risks associated with flipping properties unfortunately. Another risk would be the risk of seriously underestimating the amount of money that will be required in order to do the necessary work. This is something that many first time investors find is a fairly common occurrence. Most people have unrealistic expectations of exactly how far their dollars will go when it comes to investing in the materials and labor needed to properly rehab a property. Even minor cosmetic repairs throughout a house can easily run into several thousands of dollars in order to repair. The flip side is that once these repairs are made the potential profits run into several tens of thousands of dollars.

Another risk that isn’t often considered is the risk of overestimating abilities. This is one risk that costs not only precious time but valuable money as well. Not only is material wasted in the process of discovering you aren’t exactly skilled in any particular tasks but also there are further expenses (often unplanned) involved in hiring the professional to repair the damage and replace the material that was wasted. When in doubt, it is almost always best to hire a professional if at all possible. This also leads to missing deadlines, going seriously off schedule, and adding yet another mortgage payment (if not more than one) to the overall price of the project.

The final risk is often something that simply cannot be seen or anticipated. This was experienced in the days immediately following 9-11 and should not be forgotten. The unforeseen happens every day. Markets crash; local economies can be devastated by the announcement of a major employer that it is going out of business (thinks of the collapse of companies such as Enron and World Comm and what they did to local economies). In these instances, the market will take quite a while to recover from the shock to its system and ‘flippers’ among other investors are often left feeling just as lost and devastated as those that were victimized by these companies—both through no fault of their own.

Stuff happens and those things that we have absolutely no control over are almost always the things that affect us most profoundly. The same holds true when it comes to property investment. The state of the economy, the housing market in an area, and sudden announcements that affect either can often have the most profound impact on those who are investing in property in those areas whether for better or for worse. The trick is in deciding which risks are acceptable.

Finances:  The Importance of Creating a Budget for Yourself

Are you a debt-ridden woman?  Even if debt may not be an issue for you now, there is a good chance that it will become one in the future. Whether you are in debt now or if you are looking to prevent yourself from falling victim to it, you may want to examine budgets. Creating a budget for yourself is a simple process, but it is one that can help to keep you out of debt or even get you out of debt.

Before examining how you can go about creating a budget for yourself, it is important to understand the importance of budgets.  As previously stated, budgets are a tool that can be used to make sure that debt isn’t any longer an issue for you.  By creating yourself a budget you are able to track your spending, as well as ensure that all needed expenses, like your car instance or your mortgage, get paid.  This also gives you the opportunity to examine how much extra money you have each month, money that you could put towards repaying your debt or put in a savings account, if you aren’t in debt right now.

When it comes to creating a budget for yourself, you should be able to find a number of budget templates online for you to use. While these free resources are nice, you may only want to use them as starting points.  You can get great ideas from them, but you may want to create your own budget. This is important because not all individuals lead the same lives or have the same expenses to take care of.  For instance, a budget template for those in New York City may not necessarily call for car payments or auto insurance, but if you had a vehicle, you will need these sections displayed on your budget. 

It is also advised that you take the time to create a budget for each month of the year.  As previously stated, a budget allows you to account for your spend in advance.  If you have a birthday party in July that you need to attend, you may need to account for buying a gift.  However, this is something that will likely not occur each month.  Creating individual budgets for each month of the year may seem like a complicated process, but it doesn’t have to be.  It may take a few extra minutes, but those few minutes are more than worth it.

To get you started with saving your money, to help relieve the stress and other issues often associated with debt, you will want to start by outlining all expenses that you must pay for on a monthly basis.  These expenses are ones in which you cannot go without paying, like rent, mortgage, renters insurance, homeowners insurance, auto insurance, auto loan payments, groceries, and your utility bills. These are the expenses that must be paid, no matter what. 

Once you have a detailed list of important expenses, like those that you are unable to go with out, you can focus on the next level of importance.  These are items such as internet access or cable television.  If you are just looking to save money, possibly to put into a savings account, you should be able to continue paying these expenses without any problems.  On the other hand, if you are looking to dig yourself out of all of the unpaid debt that you have accumulated, it may be a good idea to go without internet access or cable television, if at all possible, even if it is just for a short period of time.

You can also use your budget to determine how much extra money you will have each month.  You can do this if you regularly work the same hours or if your pay is salary based.  Once you have totaled up all of the aforementioned expenses, you can subtract that from the amount of the money that you bring home from work each week.  Any extra is money that you may want to consider putting towards your debt or saving, just in case.