House flipping is when you buy a house that needs renovations, make the necessary renovations, and then resell the house for a profit. Plenty of people make excellent income flipping houses, but many people have lost a lot of money in the business. While there is great potential, there is also significant risk. Understanding the business and how to avoid common mistakes will help you turn a profit flipping houses. Here are four common house-flipping mistakes to avoid.
1. Buying Too High
The goal in house flipping is to sell the house at a profit, which means you need to buy the house below market value so that the renovations can be done and the total cost remains below market value. Sometimes, potential investors get excited about a property and pay way too much for it because they have an unrealistic idea of what they will be able to sell it for or how much the renovation costs will run.
David Lindahl has been in the real estate business for years and has over 550 deals. Even though he understands the value of houses and what factors to look at, when looking at a new property, he still has to do the market research and what needs to be done to sell the house. No matter how long you are in the business, you still have to be mindful of how much you pay for a property because you can lose money.
2. Not Investigating the Needed Repairs
House repairs can get expensive very quickly, so it is critical to investigate what significant repairs will be needed and get estimates if you aren’t already familiar with the average prices. You need to consider the estimated renovation costs when determining the profitability of a project. If you buy a house for $100,000 and it needs $50,000 in repairs, you need to be able to sell it for well over $150,000 not to lose money on the deal. Remember that breaking even is indeed losing money because you are not compensated for the extensive amount of time you put into the project.
If you need a service that you aren’t familiar with, you can contact any professional in the area to give you an idea of the cost. For example, if you have concerns about the house having older windows, you can search All Weather Seal of West Michigan, and they will come out, inspect the windows, and give you a detailed estimate of the work that needs to be done how much it will cost.
3. Paying Too Much for Renovations
As highlighted in the previous section, the renovation costs can cause a potentially good investment to turn into a loss. Even if the estimated repairs are reasonable, you have to assume another 10% of the total project costs for unexpected repairs. Houses that have not been adequately cared for years tend to have unexpected problems. Additionally, it is essential to work with contractors you can trust, so ensure you are not taken advantage of once a job starts.
4. Taking Too Long to Sell
The longer you own the house, the higher the out-of-pocket expenses will be. Every month, the house is in your name; you make the mortgage payment, pay the utilities, and pay interest and taxes. Taking too long to sell a house can be the difference between a profitable flip and an unprofitable flip. Before you even buy the house, your sole focus should be on selling the house. For every renovation decision, you make sure to be focused on what will allow the house to sell fast and at the highest price.
Shreyashi is a software engineer in the US. Along with her work schedule, she has managed to travel all the 50 States of the country and wants to pen down her experiences, journeys, and joys through her write-ups and share them with the world. You can find more details on https://www.travelthefoodforthesoul.com/about-me/
