House flipping still remains a potentially lucrative endeavor that many investors in the 2000s likened to day trading. In order to get the most out of your house flipping investment, make sure you avoid the following flops that could waste both money and time.
Underestimating Costs
This is probably the biggest mistake made by would-be house flippers. Property acquisition is one thing, but it’s important to keep in mind that a price that looks good for an immediate living area, is usually not a good price to pay for a potential flip.
The point of flipping is to add sweat equity to a house that needs it, and then resell it. The key to avoid this is to make sure you are factoring in all costs in when looking at a base price.
Not Considering Comps
When it comes time to resell a house, it’s important to know what other houses in the neighborhood are selling for. You cannot expect to add luxury improvements and sell one house for $500,000, when all other houses nearby sell in the range of $200,000. Companies like Reinvest Consultants can give you a ballpark figure in what to aim for with your renovations.
Lack of Skills
The majority of money in house flipping is made through sweat equity. Often professionals in the building industry use it as a side job because they can put in their own sweat equity and use their own materials to upgrade counters and cabinets among other things.
If you have zero skills in these areas, you might want to reconsider. If you’re not doing any work yourself, which means you’re paying someone else, and your profits dwindle as a result.
Not Planning Ahead
Not only do you need to plan for all costs involved in your house-flipping venture, but you also need to plan for an early exit. That means having a backup plan if your flip starts to go south. This could mean renting the house until a failing market improves, or selling the house wholesale to another investor should something unexpected come up.
Avoiding Advice
If you’re just getting into house flipping, getting expert advice is crucial. It will likely pay in the long run to enlist reinvestment consultants to help you find the right home and not pay too much. The price you pay for the home to begin with may dictate the rest of your venture.
House flipping has the potential to be a great investment, but it’s crucial to make sure all your bases are covered before getting into it. Chat with a First Team agent before you take the plunge. Find an expert near you online or reach out and we’ll match you with a specialist in your neighborhood.
This guest post was written by Brooke Chaplan, a freelance writer and blogger. She lives and works out of her home in Los Lunas, New Mexico. She loves the outdoors and spends most her time hiking, biking and gardening. For more information contact Brooke via Twitter @BrookeChaplan.
