Flippers need to be very sensitive to trends in their local market.
If housing prices are edging downward, and if foreclosures are on the upturn, the market might become flooded with properties.
Lenders are not in the real estate business. They are just not set up to manage, insure, maintain, and market homes. In a flooded market, they will begin slashing prices just to move inventory. That is your competition if you are a flipper. You will be competing against lenders trying to dispose of foreclosed homes and other flippers able to purchase more cheaply than you did.
If your housing market fits this profile, you will need to buy more cheaply than you perhaps originally anticipated. That is so you will have a larger cushion in case you face heavy price competition when you are ready to sell.
You should also be prepared to hold the house longer than anticipated, renting it out to cover your holding expenses. Make sure you have properly evaluated the rental opportunities for any house you want to buy. When preparing a budget for that possibility, be sure to include mortgage payments, insurance, real estate taxes, homeowners’ association dues, and reasonably anticipated expenses.
Finally, have a lender lined up for long-term financing for several years.
Most flippers borrow money for short terms of six to twelve months. Unless you have a commitment to renew your loan several times, or you have a take-out lender for permanent financing, you could find yourself facing foreclosure.