TV reality shows have made house flipping seem easy and economically sexy. All you need to do is find an undervalued property, make cosmetic fixes, sell it and make a profit, right? Well, in reality, several things can go wrong leading to failure. This happens when real estate investors and house flippers make mistakes.
Want to know the pitfalls and traps flippers make and how to avoid them?
1. Choosing a Bad Location
Location is one of the most important factors when it comes to flipping houses for a profit. While undervalued properties are a diamond in the rough, if your flip is in a bad neighborhood, it will be impossible to sell. Also, if the property is inaccessible from traffic, it will be hard to sell it.
What you need to know is that a flip is worth as much as its location. If the flip is in a bad neighborhood or high-crime area as mentioned above, no one will be interested in buying the property.
To ensure your flip sells, look for the right location. Such a location should have desirable amenities like sidewalks, street lights, curb appeal, and much more. The property should also be within walking or driving distance of the buyer’s favorite places. Examples include gyms, grocery stores, fast food, parks, schools, childcare, highways, and others.
Roads in and out of the neighborhood should be in great condition. They should also allow easy access to service drives and freeways. To put it simply, the best flips are far away from irritants such as excessive noise and busy streets. To make a profit from your flip, find undervalued properties that need a little TLC but are close to the amenities above.
2. Failure to Budget
Another mistake that real estate investors make is the failure to budget. Not budgeting can lead to overspending or underestimating the repairs, and other costs. As you already know, costs fluctuate extensively depending on the type of property, renovations, and location.
Before you plunge into flipping, you need to budget. With a budget, you’ll be able to work out all your holding costs for 6 months while keeping money aside. The costs include lender payments, insurance, lender inspections, monitoring, and other costs. There is nothing worse than a real investor running aground financially because they failed to budget.
Therefore, it‘s important to factor in all the costs, especially repairs and renovation costs. Since you plan on fixing up the flip and selling it for profit, the final sale price should exceed the cost of acquisition, cost of renovation, and others. So, before you settle on a flip, make sure that you’ve a flexible budget that will handle any unpredictable obstacles.
3. Hiring Less Qualified Individuals
Real estate investors get into the fix and flip competitive world to make money. When flipping homes, renovations, and repairs are necessary. However, one mistake that every house flipper or real estate investor makes is hiring less qualified individuals.
One reason house flippers will opt to hire less qualified people is that they can hire many people at a lower cost. Basically, they want to hire lots of people to fill similar roles and spend less.
Speaking of spending less, house flippers will also hire less qualified people because they want to save money. How you may ask. Since the people are less qualified, they will pay them less money. In reality, house flippers who hire less qualified people will not save money. Instead, it will cost them more.
This is because the less qualified individuals will do more damage than good. As such, one will have to hire qualified, and licensed professionals to complete all the repairs. This includes those made by the less qualified people.
We recommend hiring professionals as they will complete the renovations to proper standards. Not only that, they will save you money and time as repairs completed will not lead to additional repairs down the road.
Flipping houses is a time-consuming venture. In fact, it can take months for you to complete the repairs and renovations and then sell the flip for a profit. To save money and time, choose the right location, budget, and hire experienced and licensed professionals.