Diving into the real estate investment world can be very exciting—and there’s certainly a lot of money to be made. If you don’t have much experience or haven’t done your research, though, your first fix-and-flip could end up being a disaster. By being aware of some of the most common mistakes investors make with fix-and-flip properties and how to avoid them, you can come out on top.
Paying Too Much for the Property
Start with knowing how to determine a fair asking price for the property in question. Many factors need to be taken into consideration when deciding how much to pay for an investment property, including:
- the location
- square footage
- number of bedrooms/bathrooms
- overall condition
And of course, you’ll also need to consider how much you’ll be able to realistically sell the property for once you’ve made the improvements. Make sure an investment property is going to be worth your time and will actually pay off in the long-run. Otherwise, you’re setting yourself up for failure right from the beginning.
Doing Too Much (Or Too Little)
Deciding on how to spend your renovation budget on a fix-and-flip property is a very precise science. You’ll need to have a solid understanding of which improvements and repairs will ultimately yield you the best return on your investment. From there, you can make smart choices moving forward.
For example, did you know that adding a wooden deck or patio on an investment property can bring in as much as a 90% return on your investment? Other projects to consider that can really pay off include bathroom/kitchen upgrades and landscaping improvements.
Choosing the Wrong Professionals
Even if you consider yourself a DIY expert, you won’t want to take on an entire fix-and-flip yourself. Instead, your time and resources will be better spent making big-picture decisions and overseeing a team of experienced and licensed professionals.
The contractors you choose to trust with your property’s repairs and improvements can have a huge impact on the results—and on your bottom line. Take the time to screen and interview potential contractors, and always make sure they’re properly licensed, bonded, and insured.
Making Polarizing Design Choices
Ultimately, your goal with an investment property should be to appeal to as large of an audience of potential buyers as possible. This means that you’ll want to avoid making polarizing design choices and keep things neutral instead. As much as you might love the idea of installing a bright and bold backsplash tile in the kitchen, you’ll probably get better feedback from potential buyers if you stick with something neutral and in-demand, like a white subway tile backsplash.
As you can see, there’s a lot to keep in mind when it comes to taking on a fix-and-flip property. By starting with the right purchase price and choosing a team of reputable contractors to carry out your projects, you’ll be well on your way to making some money with your first real estate investment!