The Financial Truth about Flipping Houses
Minimum Bottom Line Profit Should Average 9.4%!
For Trades & Subcontractors, at Least 11%
After Income Taxes Are Paid!
During my recent vacation, I had the chance to watch one of those reality shows about flipping real estate. These two partners in Texas bought a house, fixed it up, and then sold the house. The show illustrated that they made $52,000 from the deal. Really? I have yet to see a deal like that in my accounting experience. I have done the accounting for over 45 deals with 7 different business operations. Not a single deal came even close. Therefore, I’m going to illustrate for you the truth about this industry, I’ll identify the best deal and the worse. I’ll also calculate the average so that you can truly assess whether or not you want to get involved in this industry.
Business is a risk reward concept. The more risk involved, the more reward earned by the risk taker. There are several risks in this business. At the end of the day, you have to sell the house in order to reap any financial reward, if a reward exists. The current market (2020) indicators are that most homes sit on the market for more than 90 days before closing. The best scenario is to get the house sold as fast as possible, and the only way to do this is for the house to be in tip top shape. In effect, when the potential buyer sees the house, the house is in better or more modern condition than the others they peruse. Naturally,