5 Mistakes That Can Make House Flipping a Flop
Flipping a house may look easy on TV, but in reality there’s a minefield of mistakes to be made if you’re a first-time flipper. Even if you’ve got one flip under your belt, you should remember that each home is unique. It takes a while to create a surefire plan that works. Although you’re always learning on the job, there are a few lessons that are best not to learn from experience. Here are five mistakes to avoid at all costs on your next flip.
Not having money on hand
Flipping a house can quickly become a costly endeavor, and that’s beyond your initial investments like a down payment, insurance titles, and closing costs. Financing a flip can often require a constant stream of money, as contractors and materials need to be purchased. Plus, you never know what kinds of other issues may crop up.
If termites, shoddy wiring, or black mold crops up in the home during your flip, it’s vital that you have a contingency fund to address these problems. If you already own a home or investment property, one way to get some extra money is to look into investment loan rates in your area. Many investment loan companies will be able to offer competitive interest rates and may even be able to expedite the process if you need to come up with the money quickly.
Failing to make an appropriate plan
As is the case in most businesses, if you don’t have a strategy, you will quickly fail. Flipping houses is an immense task, and having a clearly-defined strategy that outlines the type of property and neighborhood you’re looking at investing in, as well as your target selling price, can go a long way in protecting your finances. Your plan should also outline the timeframe you want to complete your project in and a budget that addresses contracting costs, building materials, and any other aspects of the upgrade process that could affect your budget.
Consider whether or not you will be knocking down walls or adding onto any existing rooms during your flip, too, as this will affect who you need to hire. Understanding the market is also a major component of making a plan that is as realistic as it is actionable. There are plenty of online home value calculators that can help you better understand what homes tend to go for in different neighborhoods.
Hiring the wrong people
Any construction project can be made or broken thanks to the quality of contractors you hire. As such, it’s crucial that you properly vet the contractors you are looking at hiring prior to signing any agreement with them. Seeking recommendations from friends or family members, or consulting online databases like Yelp and Angie’s List can help you avoid a disastrous working relationship. If you put in the work to properly hire each individual who sets foot on your property, you will increase your chances of having a smooth flip.
Skimping where it matters
While it may be tempting to save money on some aspects of your flip in order to increase your profit margins, there are some factors associated with a remodel that should never be avoided. Typically, bathrooms and kitchens require the most attention in a flip, and can make the biggest difference when it comes to closing prices.
While new countertops and stainless steel appliances can increase your bottom line, it’s just as important to remember that other cosmetic renovations play a crucial role in a flip, too. Don’t forget about curb appeal as you plan your redesign, and make sure to budget for landscaping, window replacement, and new siding if you want to make small investments that also offer a high ROI.
Sitting on the property too long
One final tip to keep in mind when flipping a home is to try not to time the market. Sitting on a property while you wait for the right offer can ultimately leave money on the table. When making your flipping plan, be sure to account for the lowest offer you’ll accept on the home, so that you don’t make a mistake and end up needing to accept an even lower offer down the line.
Flipping houses can be a great way to make money, but the process comes with its pitfalls. Keep in mind the above pieces of advice as you approach your next flipping project, and you’ll be able to find success in the exciting world of property investment.