Thinking about embarking on a house-flipping project? Before you dive in, there are a few common mistakes you’ll want to be sure to avoid.
Lack of Funds
Many new house-flippers fail to realize just how much capital needs to be available not only to purchase the fixer-upper, but to actually do the fixing-up. When possible, homes should be bought with cash so as to avoid accruing interest on a loan. Regardless of the method used to purchase a home, additional costs must be factored in on top of renovations. These include taxes, utilities, and even capital gains taxes when the home sells.
Not Knowing the Market
A successful house flip always begins with a solid understanding of the local market. You need to know, for example, what homes in the area tend to sell for before you buy. You can’t expect to purchase a fixer-upper for $75,000 and sell it for $150,000 when most homes in the area sell for a max of $100,000.
Hiring a Pro for Everything
Sweat equity is key when flipping a house, so this is a job best suited for people who already have at least a little bit of DIY experience when it comes to home renovations. Otherwise, you’ll need to hire a professional for the majority of the work, which quickly eats away at your profits. While you’ll probably need to hire pros for at least some of the work (especially electrical and other potentially dangerous projects), the more you can do yourself, the better off you’ll be.
Being Impatient
The entire process takes time, yet so many people go into their first house flip anticipating that they’ll go in, get the work done in a week or so, and sell right away for a huge profit. In reality, house-flipping projects very rarely work out this way. More than likely, you will encounter hiccups and hang-ups along the way, so patience is a virtue when it comes to a successful house flip.
Underestimating the Time Investment
Flipping a house can easily become a full-time job, so don’t expect it to be a small “side project” that you can work on in your free time. There is a good chance the project will consume all of your free time and then some, so one of the worst mistakes you can make is embarking on a house flip without realizing the time commitment required.
When you have a solid understanding of what to expect and what will be expected of you before flipping a home, you’ll be in much better shape. Be sure to avoid these common mistakes as you prepare for your first house flip and you’ll have a much easier time!
