I’ve said it before, and I’ll say it again: house flipping is basically recession-proof investing. Getting into real estate investing by flipping houses is a great way to leave the 9:00-to-5:00 world and live a life of financial freedom. Of course, just like any other type of investment, there are always some risks involved with house flipping. That’s why I always tell our Success Path Education students to do as much research as possible on the house flipping business and their local real estate markets before getting started.
As you start doing your homework on house flipping, there are a few things you should consider, especially concerning your local real estate market.
DON’T MISINTERPRET THE DATA
They say that numbers don’t lie, but there can be a lot of different ways to interpret those numbers that can lead you to some really inaccurate conclusions. For example, if you saw a statistic that said 90% of all home invasions in a certain area happened within 10 miles of a given neighborhood, you might think that you should avoid buying, investing, or living in that neighborhood no matter what.
What if you then learned that 80% of the residences in the area were in that 10-mile radius? Home invasions don’t happen in office parks and financial districts— they happen in residential areas. So, instead of just looking at percentages, it’s a good idea to look at raw numbers to see how things are going, both with crime rates and other statistics, like market values.
DON’T DO ALL OF YOUR MARKET RESEARCH ON ZILLOW OR TRULIA
Real estate aggregate sites like Zillow and Trulia can be really helpful, but they can also be misleading. Their mortgage and market value calculators are based on a few algorithms, as well as the information that people have supplied for their listings. This can lead you to some really skewed conceptions of what houses should sell for in the neighborhood and how much you should ask for yours.
CONSIDER HOW LONG HOUSES HAVE BEEN ON THE MARKET
Another important consideration is how long the comps in the area have been sitting on the market. If you just look at a couple of comps’ market prices, you might think that you’ll be able to ask for $400,000 for your house when you get done renovating. If you do that without looking at how long those houses have been sitting on the market, though, you might miss the fact that none of the comps sitting at $400,000 are moving and that the actual selling prices for houses in the area is closer to $300,000.
ALWAYS GET YOUR DATA FROM GOOD SOURCES
Whether you’re researching property values, crime rates, or anything else about an area, don’t trust just any source. You can get records on property values from the local tax office, and you can find government records about crime rates. These will give you the most accurate information about the area that won’t be skewed by anyone’s agenda.
Always get as much information as you possibly can about the market, the neighborhood, and everything else about a flip house before you buy. But don’t just assume that all of your info is accurate. Look at the sources, how the data might be interpreted in different ways, and how you can get more information directly from a government source. Keep these things in mind, and you’ll get much better information to help you get started flipping houses near you.