The Risks of Flipping a Home for the First Time

The Risks of Flipping a Home for the First Time – Don’t be fooled by “Flipping only works in an appreciating market where homes move quickly.” It’s all in the buy. Write deep offers, be patient and close quickly (or lose BIG).

The Risks of First-Time Home Flipping

“Flipping only works in a market where households move fast,” says Glen Weinberg, Fairview Commercial Lending’s Denver-based COO. “These factors are in flux now, and that’s what will cause many flippers to die.”

According to Bloomberg, approximately 6.5 percent of U.S. sales in the fourth quarter were flips, or homes sold within a year of last changing hands. According to CoreLogic, this made for the highest share of seasonally adjusted data back to 2002. Analyzed by CoreLogic, 45 percent of flips lost money in the San Jose area.

On a property in Sunnyvale, California, a young investor, Sean Pan, who started flipping at 27, lost $400,000. After starting the asking price down from $2 million, Pan bought one home for $1.8 million, assuming he had a “sweet deal,” but the home sold for $1.7 million, more than $80,000 less than he paid for it.

“When you buy these houses, you never think you’ll lose money,” he said. “I fixed it up. It should be worth more, but things change.”

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