House flipping can bring problems in risky economy

MCCLATCHY-TRIBUNE NEWS SERVICE
Published: November 29, 2008

Todd Calamita, a personal financial planner with RBC Wealth Management in Charlotte, N.C., said house flipping is risky, especially in an uncertain economy. You should consider the following:

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Are you able to pay cash or do you need to take a mortgage out on the house? If you pay cash, look at the potential opportunity cost of having your money tied up in an asset that can’t be sold immediately. This is exactly what is happening in the market right now. There is too much supply.

If you did not pay cash, you are increasing the cost of your investment by paying mortgage interest on the house while you wait to sell it. This is an expense that is sometimes overlooked by investors.

Evaluate whether you could rent it if things get bad and you couldn’t sell it. If you have a mortgage, you should consider whether you need the rent to cover the mortgage or whether you could afford to pay a portion.


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Related Topics: Business, Personal Finance, Home Financing, Consumer Credit and Debt, Financial Planning, Personal Budgeting


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