If you’re seriously considering getting into the house flipping business, then make sure to read up on some of these common mistakes novice house flippers make.
Lack of Planning
You wouldn’t start a bike shop or a grocery store without a business plan—creating a business plan for a house flipping enterprise is essential. Writing a business plan requires working through many of the common mistakes beginners often make. Flipping houses is a business like any other, and you must treat it like one. A business plan would consider:
- Available capital (how much money you have to put into the enterprise)
- Estimated purchase and renovation costs and expected return on investment
- Costs that will be absorbed during flipping projects (such as taxes, utilities, and insurance)
- Costs associated with completion (marketing, real estate agent and attorney’s fees, etc.)
A business plan combines all these considerations and more into a detailed budget and timeline that spells out a map to success.
Novice house flippers skip this step all too often and come to regret it when contingencies arise and cash runs low—or worse, runs out altogether.
Overestimation of Skills
A little experience in laying some tile, patching drywall, or even framing up a wall or two is good, but you probably won’t be able to handle updating plumbing, installing new electrical systems, or creating custom carpentry on your own.
Beginners need to make a realistic assessment of what they can and can’t do on their own and plan for the parts of the project that will require professional assistance.
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Lack of Research
Understanding the market is essential to any real estate investment effort. Novice house flippers must avoid the temptation to snap up the first foreclosure or fixer-upper that comes to their attention. Beginners should study the neighborhood they’re considering, learn about comparable home values, and research the competition.
More and more financial institutions and real estate firms are getting into the flipping business themselves, so beginners must be cautious about the pool they’re diving into.
Choosing a Money Pit
Sadly, some properties are just beyond saving—or at least beyond a novice house flipper’s financial ability to save. Homes with serious structural issues or that otherwise need major repair may be too much for a novice to take on, no matter how attractive the price.
Escalating repair costs can sink the effort and turn an investment into a liability with each newly discovered flaw. Professional home inspections are a must for anyone flipping houses, whether they’re just starting out or several properties in.
other valuable tips:
The Business of Buying: 4 Steps to Take before Flipping Your First House
Over-Personalization
Beginners often risk turning their investment into their version of a dream home, but failing to consider the preferences of the intended buyer will only extend the completed home’s time on the market. Researching which improvements will pay off – such as how security system reduce home insurance premiums – and which ones won’t is an important step to complete before you begin renovations. Novices would be wise to engage the services of a real estate professional to help with staging and marketing the property when it’s time to sell.
Before getting into the business of flipping houses, beginners should plan, budget, accept financial and personal limitations, seek expert advice, and research neighborhoods, home values, recent sales, and competition. Patience pays off by helping novices choose investment properties wisely.
Image credit: mistakes house flipper makes by Pixabay
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