5 House Flipping Mistakes to Avoid

It looks so easy! Buy a house, make a few cosmetic fixes, put it back on the market and make a huge profit. These days, house flipping is a popular concept. There are entire TV shows devoted to it. It may even be something you’ve thought about doing yourself. Plenty of homes are getting flipped. ATTOM Data Solutions says that more than 200,000 in the U.S. were bought and then resold within the same 12-month period last year. That’s just under 6% of all the single-family homes and condos sold all year.

The premise is simple: You buy a home that might not be in the best condition. Because of its state of disrepair, you get it for a good deal. You spend a few weeks fixing the place up, then quickly list and get the place sold. And, you should walk away with a tidy little profit. However, the road to real-estate riches isn’t all about taking the ugly duckling, giving it curb appeal, sprucing up the interior and then selling the home for an insane profit. Flipping a house can go smoothly, if you establish a business plan and take the worst-case scenario into account before you decide to invest. However, the truth is that far too many would-be real estate tycoons overlook the basics and end up losing their shirts. In order, to help you to keep your shirt and keep you from draining your bank account, I am going to cover the five biggest mistakes would-be flippers make – and how to avoid them.

Here are five house flipping mistakes to avoid that could derail your investment:

•Not having enough money.

•Not having a business plan.

•Not having property insurance.

•Not understanding the market.

•Overpricing your listing.

The #1 House Flipping Mistake is Not Having Enough Money

You’ve probably heard the motto about how you need to spend money to make money. This is certainly true for house flipping. Before you can realize a profit, you’ve got to sink a little money into fixing the place up – making repairs, adding new fixtures, replacing appliances and more. How much exactly all of this could cost depends on the upgrades you make, the materials you use and who is making the repairs. For example, if you want to replace the countertops in the kitchen, the difference between choosing marble, granite or Silestone can make a big difference. But what happens if you buy a house that’s in disrepair, and then realize you don’t have the resources you need to fix it up? That can wreck all your plans for a successful house flip. Always make sure you’ve got some extra cash on hand before you invest in a house flip property.

The #2 House Flipping Mistake is Not Having a Business Plan

House flipping isn’t just about getting the home sold. It’s about getting the margins right. It requires you to not overpay on the front end; to stay on-time and on budget as you make repairs; to list and sell the home pragmatically; and to achieve a certain sale price. If any of these components are out of place, you may end up losing money on your house flip. That’s what makes it so necessary to have a business plan where you lay everything out in advance – and maybe leave yourself a little room for error. A business plan could include:

1. A list of all the repairs you want to make.

2. A list of accurate estimates for everything you want to replace so you can stay on budget.

3. A schedule to make sure you are spending the right amount of time on certain projects.

The #3 House Flipping Mistake is Not Having Property Insurance

One of the top home selling tips for flippers: Get homeowner’s insurance. Yes, really. Property insurance isn’t just for your residential property. It can also help you protect your house flip against fire, flood or items and materials lost to theft. Yes, it’s going to eat into your margins just a little. But imagine the alternative – buying an investment property and losing everything in a natural or un-natural disaster. Insurance can make that a non-issue.

The #4 House Flipping Mistake is Not Understanding the Market

A successful house flip isn’t just about the property; it’s about the market itself. Simply put, you can get a great deal on your initial investment, you can spruce the place up and you can list it for a competitive price. But if the market’s bad, you may still have a hard time selling. Intimate knowledge of your local real estate market is essential to any successful flip. You will want to look at the comparable home sales in the neighborhood. How much are houses with similar floor plans and square footage listing for? How are neighboring houses that have been listed doing? Have they gotten any offers or has the home selling process been slow? Have those offers been below asking price, and by how much? How long have neighboring houses been on the market? These are all helpful questions to ask yourself before purchasing a home you have the intention of flipping.

The #5 House Flipping Mistake is Not Overpricing Your Listing

When it comes to how to sell a house, pricing is always key. And that’s very much the case when you’re flipping. If you undervalue it, you’re leaving money on the table. And if you overprice it, you won’t get any takers – and the property may just languish on the market. Either way, your investment is in trouble. We will help you as your realtors to do your due diligence, check comps and survey the market, before we help you price your home.)   And by the way, you’ll want to start thinking about pricing before you invest, ensuring it’s going to be worth your time and investment.

The Wrap Up: House flipping can be exciting – and profitable. But that’s only possible when you take care to do it right. Be prepared! If you have the right connections, resources, and patience, flipping houses can be a great investment venture. For a list of potential flip homes in your area, give us a call at 916-269-3337 or go to www.theradiorealtors.com.