From an outsider’s perspective, flipping a house seems like a relatively easy process. You buy a house, renovate it, and then sell it for a profit–simple, right? Technically, this is the basic process of flipping a house, but there is so much more to it than that.
That said, it can be easy to make mistakes when flipping a house for the first time, even if you did your homework. However, by knowing what these mistakes are beforehand, you can better learn how to avoid them when you finally start flipping.
Here are some of the most common mistakes that first-time flippers make and how you can avoid them:
Don’t buy the first house you see, even it seems like the perfect one to flip. Shop around and consider your options to ensure that you maximize your investment. At the same time, don’t rush into an investment until you have enough for the down payment plus other charges involved in buying a property (home inspection, closing costs, taxes, etc.), especially if you’re investing in real estate for the first time.
The same goes for the flipping process itself. Take your time in making renovation plans, considering different designs, and finding the right contractors for the job. If you squeeze the project into a short time frame, you could be compromising the quality of the results, and ultimately, your profit.
2. Thinking it’s a one-man job
You may be handy with a hammer, but that doesn’t mean you can take on everything yourself. Many first-time flippers underestimate the amount of help they need to successfully flip a house. As a result, they often find themselves facing delays because they need more people to finish the job, especially the specialized ones that they do not have the skills or tools for.
To avoid this mistake, think realistically about what kind of help you need and how much you need of it. For instance, if you can do basic construction work but you can’t handle siding installation on your own, you need to hire someone to do it for you, and that means extra costs. Moreover, you need people to do handle the non-renovation aspects of the house flip, such as real estate, insurance, and legal matters.
3. Ignoring easy fixes
The easiest fixes should be at the very top of your priority list when flipping a house. Not only are they easy and inexpensive to do, but they can also make a huge difference in the house’s quality. Moreover, savvy homebuyers notice these little details and the house will be more appealing to them if they don’t have to accomplish a thousand small repair jobs when they move in.
4. Holding a property for too long
There are many issues that come with holding on to a property that is not supposed to be yours for long. For one, the longer you hold a property, the more you pay in interest, taxes, insurance premiums, and utilities. Furthermore, you may end up holding onto a depreciating asset, depending on the state of the market.
The best ways to shorten your holding period is to make a proper pipeline that outlines when the house should be finished, create a solid plan on how you’re going to sell the house, and contacting potential buyers as early you possibly can. Moreover, you must be prepared with contingency plans in case you run into unexpected delays during the renovation process. This way, you can minimize those delays as much as possible and be better able to stick to your schedule.
5. Not leveraging other people’s money
Financing a flip with your own money may make the most perfect sense. After all, when you use your own money, you are the only one on the line in case something goes wrong.
This strategy is not an issue when it comes to high-quality buy-and-hold properties, and you may even have a good chance of securing a loan with a traditional lender or bank. However, when you intend to flip a home in poor condition, it will be highly unlikely to get a loan from a traditional lender. Instead, you may have to get your funds from a hard money lender, which generally loans for almost any property but may have higher interest rates than traditional lenders.
These mistakes are common among beginner flippers, but any flipper can commit them at any point in their career. With that in mind, it’s best to learn how to avoid these mistakes now that you are just starting to be able to maximize your profits despite being a beginner.