Make big profit

4 Responses to “What is the reason for having such a short deadline on house flipping if the profit margin is so high anyway?”

1. MoneyMonkey, on February 21st, 2009 at 3:49 am Said:

   Either, you’re watching too much television … they are on a tv show’s production schedule; or

   The cost of repairs is being charged to a credit card or other loan and they must turn it over to keep from paying financing costs. Also, even with a healthy profit, the money is tied up in the house and can not be used to buy the next house. The risk is that the property will not sell or will go down in value, so timing is critical.

2. woody, on February 21st, 2009 at 11:27 pm Said:

   while the profit margins can be high that is often the gross profit. in the meantime you are paying mortgage costs, your down payment cash is tied up, you have likely subcontracted some or much of the labor, high material costs, besides the value of your own time quickly eat into that gross profit. if you are doing this on your own you’ve got to split time between the current project and finding the next one.

   in addition to that there is a huge downside risk that your flip won’t sell (especially in this market).

3. newjerseyguy, on February 22nd, 2009 at 7:42 am Said:

   Don’t believe those stupid TV shows.

4. broccoli brain, on February 25th, 2009 at 9:27 am Said:

   The short answer is carrying costs. Interest charges eat into profit. If you can flip it in 4 weeks, you don’t even have to make the first payment on the loan wich is 99% interest.

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