Watch Out for These Common House Flipping Mistakes
House flipping can be rewarding and lucrative, especially in a location with a high demand for housing and a hot real estate market. If you are planning to buy a fixer upper and flip it, make sure to watch out for these common mistakes flippers make.
Underestimating Costs
One of the biggest mistakes house flippers make is underestimating the total cost of the project. While the purchase price of a property is often the focus, renovation costs, carrying costs (such as utilities, property taxes, and insurance), and closing costs can add up quickly. Many first-time flippers fail to account for these additional expenses, leading to tight profit margins or losses.
Budgeting carefully, paying attention to your expenses as you go, and planning with a 10%-20% contingency fund is key to making sure you can complete your project. Before purchasing a property, do a thorough analysis of all potential costs. Get multiple quotes from multiple contractors to get a realistic idea of the cost. Understanding the full financial picture before starting will help you make smarter investment decisions.
Skipping the Professional Inspection
Some buyers, knowing they already plan to fully renovate the property, wonder if the inspection really matters. In an effort to save money or speed up the buying process, some flippers skip the home inspection. This can be a costly mistake. Hidden issues such as structural damage, electrical problems, or plumbing issues can dramatically increase renovation costs and cause delays. You may think you know what type of work the home needs, but it’s hard to be sure without an inspection, so make sure to get one after any house flipping project.
According to Ben Burks with the Burks Team, “You should never skip a home inspection when you’re looking a property you want to flip. Even if you assume it’s a gut job, the inspection is going to provide you with invaluable information to guide the process and protect your investment.”
Overestimating the After-Repair-Value (ARV)
Overestimating the potential sale price of the home after renovations can lead to unrealistic profit expectations. Many flippers make the mistake of assuming that their upgrades will drastically increase the home’s value, without considering the current market conditions or comparable properties in the area.
We can help you perform a comparative market analysis (CMA) and get a realistic idea of what the home might sell for after you’ve renovated. This can help you see a realistic renovation budget to make sure your profit margins are worth the effort.
Rushing the Process of House Flipping
We know that time is of the essence, and the longer it takes to get the property on the market after house flipping, the longer it is until you get paid. However, don’t let this pressure lead you to rushing the process. It’s easy to be tempted to cut corners or rush through the renovation, but this rarely pays off.
It’s essential to complete the renovation according to building codes, hiring the right contractors and following all the legal requirements, to attract the best buyers and the top price. Avoid the temptation to skip over important parts while house flipping; your future self will thank you for staying patient and doing the work right the first time.
Failing to Market Properly
Even if you do everything right while house flipping, a poorly marketed property can sit on the market for longer than expected, resulting in higher carrying costs and reduced profits. This is why it’s so important to have a local realtor who knows the market.
Talk to a local real estate agent for tips and information on selling your home fast without making these mistakes.
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