House Flipping: Common Mistakes to Avoid
In the Real Estate world, house flipping is the act of buying houses, doing some renovations on them, and then selling them at a profit. The thing that makes it different from the conventional buying and selling of houses is that house flipping has to happen quickly. What this means is that you really have to be a good salesman to pull this off before time runs out on you. When it comes to house flipping, the following are the mistakes you should never make.
Going in With Insufficient Funds
Never jump into a house flipping project if you do not have a substantial amount of funds. The prices involve renovating the house and all this will come out of your pocket. You will have to replace anything that is damaged, reliant the walls, mend the hedges, and even change the whole layout if need be. To reign in the spending, source all your materials from one place to get discounts through bulk purchases, this includes buying nails, roofing materials, cabinets, and drawer slides in bulk.
Not Having Time
If you decide to flip houses, clear your plate off other things because this will consume all your time. By the time you find a house that is worth flipping, you will have spent months searching all over. Add the amount of time you will need to do the renovations and you are easily looking at over 6 months on one house alone. Being a time-constrained type of sale, you will have to nail a buyer as fast as possible before house prices start tumbling down.
Not Having the Skills
Flipping a house may sound like a fun idea saying it out loud but you really must have the skills to pull this off. At the minimum, have some background in real estate to have some idea of what you will be dealing with. If you have construction experience then you will be better off as you will know exactly what the house needs without having to spend a dime on hiring a contractor to assess the house. Do not jump into house flipping just because you want to.
If patience is not your strong suit then house flipping will only wreck you emotionally. It takes time and sweat to turn a house from a derelict pile into a house worth selling. This does not happen by the flick of a finger overnight like magic. You have a lot of legwork that you have to do. Once you have completed the renovations, do not simply expect a buyer to start calling immediately, you will have to market the house and go through a couple of interested people before anyone gets to buy it. All this takes a considerable amount of patience.
Skipping Property Insurance
Investing in property projects without buying property insurance is one combination that always ends in tears. Property insurance is your safety net, it is what will help you get back your investment in case of some natural disaster on the project. If getting a profit is your biggest driving force in flipping houses, then protect that interest by purchasing good property insurance. Besides, no one will be willing to buy any property that is not insured as that is a big risk on their part.
Getting in Bed with the Wrong Partner
Owing to the capital needed to flip a house, it is common to see people forming partnerships to split the costs. This is a very sound idea but it can quickly go south if you happen to partner up with the wrong person. You will need to work with someone who is trustworthy, someone who is ready to discuss ideas rather than come up with unilateral decisions. Most partnerships in the house flipping business usually end up in courts due to irreconcilable differences. For the peace of your mind, vet people who are looking to get into partnership with you on this.
Misjudging the Market
Real estate is one of the most inconsistent markets you will ever come across. House prices rise and fall like the tides but without warning. The biggest mistake you can ever do is to inject all your money into a project only to realize at the end of it that the selling price you had in mind is no longer feasible. Always conduct research before going in to save yourself massive losses in the end.
Lacking an Exit Strategy
House flipping is too uncertain for it to be considered a full-time venture. If you happen to make a killing out of it then good for you, but do not make it your main focus. House markets crush all the time and if you happen to poll everything into it you will incur a lot of losses. Have an exit strategy, the instinct to know when to stop while you are still on a high roll.
Trying to make money is not bad, but it is important that you have a clear head when attempting any business venture, especially where real estate is involved. House flipping is a very good way to make money if you know what you are doing and what you are looking for. If the first attempt ends in a disaster do not attempt to go on with it, it may not be for you and you will be better off trying something different.