If you recently acquired real estate for investment purposes, you are not alone. According to recent reports, as many as 25% of these purchases are made by people who intend to use the property exclusively for investment purposes. There are four things you need to be aware of in order to "flip" the property in order to maximize profits.
1. Property taxes. If you keep the property for a few years, you might see an increase in your property taxes, especially if they are reevaluated during that time. Some hot housing markets have seen burdens almost twofold in only 5 or 6 years.
2. Costs associated with renovations. You might have paid a low price for a "fixer upper." Will you be able to cover your costs and make a profit when your project is finished, especially if the value of the renovated property is higher than the neighborhood average? Additionally, are you able to withstand a decline in property values?
3. Costs of insurance and mortgage: If you rent out your home and do not live there yourself, you will have to pay more for homeowners insurance. You are aware that your mortgage rate is also higher if you are financing the property.
4. Pressure on rental prices: If there are a lot of rentals on the market, you won't be able to charge as much as you would like. To be a landlord in some markets, you need to get a special license. In different business sectors the legitimate freedoms of occupants mean you could have an extensive and costly fight in freeing yourself of a terrible inhabitant. Will the increased costs and lower income levels hurt your investment?
Naturally, you can reduce your risks and expenses by carrying out the majority of the renovations on your own, appealing excessive property tax increases, and finding a dependable tenant for yourself. Flipping a house isn't easy, but with a lot of courage and determination, you can make a lot of money.