Mistakes That Can Make House Flipping a Flop
House flipping, the practice of buying homes and reselling them, can be a highly profitable trade. However, there are plenty of associated risks that you should be mindful of to make the flip successful.
If you’re thinking about participating in this ultra competitive industry, you need to be aware of a few common, yet possible costly mistakes. Listed below are important steps to avoid a handful of rookie mistakes that can be fairly easily avoided with a bit of preparation.
Exceeding Your Budget
This common mistake can often, end a career in real estate. It’s imperative that you determine a maximum amount of money you’re comfortably able to spend on a property. There are often repairs and alterations that need to be made in order to add value and marketability to the home. By staying at, or under (even better) budget, you assure you’ll have the cash on hand to make these needed alterations to the property.
Going “All-In” With Your Life Savings
No matter how strong your game plan is, this is essentially gambling with your life savings. By minimizing negative practices, you increase your chances of success in house flipping. But, as with anything, success is never guaranteed. You should never, under any circumstances, invest your entire cash flow into a property. If your plan for any reason falls through, your financial stability is at stake.
Expecting to Handle Everything Yourself
Buying and selling are only two parts of the process. There are many steps in between that usually require action from an outside party. When you’re buying and selling homes, a solid, experienced team can make your dream a success. When entering into the world of real estate, you should always have other experts address certain needs, such as:
- An attorney who specializes in investors, preferably of real estate
- An accountant, namely a CPA, to handle financial records and preparation of taxes
- Experienced contractors
- A licensed real estate agent
Acquiring Property Without a Plan
When you acquire a house for the purpose of flipping, you need to have a plan for the home before you seal the deal. Your exit plan is going to determine how you generate revenue from the property.
- Selling the home outright
- Leasing the home
- Listing the home as a rental property
To determine which of these strategies will work best with your property will depend on factors such as:
- The property’s location
- The housing market in the region
- How much revenue you’re looking to generate from the home
- How long you’re willing to “sit” on the property
These common mistakes can often lead to frustration and possibly lost capital, they are also easily avoidable. Breaking into the real estate market can seem daunting, but it is, by no means, unfeasible. With a solid plan, knowing what you want to achieve, and how to achieve it, house flipping can be a rewarding way to acquire long-term wealth.