What did Zillow do wrong? House Flipping!
Let us look at the concept of house flipping
Flipping is a term that is used to describe the purchase of a good that generates a profit by selling it quickly, it can be applied to any good of value, but it is mostly used in Real Estate. House Flipping is used by real estate investors to describe the process of buying a house, reconditioning it, and then selling the said house at a profit margin. The profits generated by flipping in real estate generally come from buying at a low price and selling at a higher price. Rising home prices have put pressure on house flipping individuals who expect to make a significant profit from the sale. If the house is very dilapidated, consider that it will require a lot of money in repairs, which reduces the profit.
When looking for a house to flip, there are several things one needs to put in perspective.
Determine if the Pull is Right for You
Make sure you have enough extra cash. Home flipping involves the purchase of a home or property. That is why, in addition to adding another mortgage to your monthly expenses, you will also most likely have to come up with a down payment. Hopefully, your sale price will cover these expenses. Regardless, you will need a large amount of cash and a flexible monthly budget to start flipping houses.
it is also other expenses, such as utilities and taxes, that come into play. Zillow had enough of these may be too much. This factor could be considered one of their problem.
Manage your Expectations.
Successful firms don’t just buy and sell homes without doing any middle work or marketing efforts. Realize that you will have to put in work and expenses to make changes around the house, in many cases. Zillow made a wrong move here as they were buying houses at such a high rate. It is safe to think that they did not do their homework right.
Make Sure you Have Enough Free Time.
This is not a weekend hobby, but a full-time job. In most cases, you will need to schedule maintenance, supervise construction for additions or changes, and take care of other issues that arise with the home. You will also have to show the house to potential buyers on your own if you do not plan to use a real estate agent.
Zillow’s timing was quite wrong considering the rate they were buying. It was almost impossible to offload such a number of houses.
The damage is done already and there is no way back. What remains is to try and keep the company afloat which is what they are trying to. It is just painful to see 25% of their staff losing their jobs abruptly.
