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House-flipping is quite an attractive business. Buy a distressed house for little money, turn it into something beautiful, and sell it for a lot of money. Sounds straight-forward, no? Maybe not. As appealing and potentially lucrative as flipping properties can be, it can also be easier to mess up than you might think. Here we will discuss some of the common mistakes new flippers make and how you can avoid making those same missteps when you embark on your house-flipping journey.
1. Taking on the whole project by yourself.
One of the worst possible mistakes you can make when flipping houses is deciding to do all of the work by yourself, or with very little help. You might think you can save money by doing everything, or most things, without a professional team. This is an understandable thought process, as the more you save is the more you make. And on certain parts of the project, such as painting, you might be able to get away with not hiring professionals to do the job. However, it is almost impossible to take on the role of contractor (unless you already are one) and flip a house alone. Don’t do it. It is overwhelming and almost never worth the amount of work and stress you’ll have when you can hire a team of trusted professionals to execute your vision perfectly.
2. Underestimating your time.
It’s easy to come up with a time for your rehab project to be finished and ready to be put on the market for sale. While it is imperative to your flip to have goals that are time sensitive, it is just as important to be realistic about the time it will actually take to complete the rehab and get your flip on the market. Be realistic about your goals and give yourself the time you need.
On the flip side, do not give yourself more time than it will actually take, especially if you are borrowing money from a lender. You will be expected to have your loan paid back after a certain time. The longer it takes to finish your flip and sell it for profit, the longer it will take for you to make the money you’ll need to pay off your loan on time.
3. Not having enough money.
This is quite possibly the worst mistake one could make when flipping a house. Underestimating the amount of money it will take to complete your project can be a major set-back. Imagine purchasing a distressed property and starting the rehab process only to realize you’ve run out of money half-way through the project. Plain and simple, that would suck and you’d be stuck. When considering flipping houses, it is important to figure out exactly how much it will cost to complete your rehab. Avoid having to ask for more money when you’re in the middle of your flip.
4. Paying too much!
Not having enough money to completely your project could easily be the result of paying too much money to flip your house. Many people have the misconception that paying tons for goods and services equates to quality craftsmanship. This thought process, however, can result in paying unnecessary amounts of money for jobs that can simply be cheaper. There is nothing wrong with shopping around for contractors who are great at their craft, but also fair and reasonable in their pricing.
If you are going to get the same quality of work from someone who charges $6,000 versus someone who charges $16,000, why not pay $6,000 and save? One of the best ways to find thorough, reasonable contractors is by asking other flippers who they’re using and who they trust for their projects. Do your research and spend wisely to avoid running out of money.
5. Little knowledge about the neighborhood of your flip.
It is definitely a mistake to try and flip a house without knowing the market. You need to know that you can make at least a decent profit from your flip before you embark on the journey. Study the market and the neighborhood your property is in. This might be a great time to utilize the services of a local realtor to help you determine the value of your property after it’s been rehabbed. This will help you decide whether or not flipping a property in that area will be a good and profitable move for you. Remember, once you close on a distressed property, the clock starts ticking on your loan. You want to be sure you won’t have a difficult time trying to sell the house once the rehab is finished and you’ve spent all the money.
House-flips can be very successful, and quite often are. However, these mistakes can stand in the way of you making a profit. Be sure to review all the information you can on all the costs that go into flipping a home as well as what you will be able to sell it for once the rehab is complete (after rehab value). Do not forget to consider the value of the neighborhood as it will be an important variable in how you price your flip. Find good contractors who will work well for fair prices and give yourself enough time to get the work done, but never more than you need. Follow these simple tips and you can be sure your flip won’t be a flop!
If you’re interested in flipping houses and would like to learn more about the process, or even to find a great lender, visit us at privatelenderofne.com and fill out our borrower information form. We would be more than happy to provide you with the funds you need for your first flip!