Have you ever thought that it would be a great investment to purchase a house that needs a little help, give it some TLC, and sell it? Great idea in theory, but if you are new to this process, you will need to know all the people who make it a success, and what to avoid to make sure you get bang for your buck.
Flipping a house isn’t easy but it can be lucrative. I’ve seen it go both ways. These are some are some things to avoid.
1. No Detailed Plan
Flipping a home is a big commitment financially, and of your time. It is key for you to create a detailed plan with the help of professionals.
- After sitting with financial professionals what should your budget be?
- List what tasks you are willing to take on. Just cosmetic? Or more renovation work?
- Using financial and tasked information, work with your real estate professional to outline what property they should be looking for.
If you have always wanted to take this on and want the help of an overarching professional that has experience with flips or renovations, seek them out to help you put together your plan.
Buying a home and refurbishing it is a big commitment that requires money and time. If you have decided that fixing up a home is what you want to do, be patient. It is an exciting time but wait for the property that fits best into the plan you have created. The extra time spent on the front end will avoid losing time and money in the future.
3. Lack of Objectiveness
When investing in homes, make sure you stay objective and stick to the plan. Be ready to walk away. Do not become emotionally invested in the property.
4. Areas That Are Not Your Specialty
It takes a lot of experts to have a profitable flip. Recognize areas where you should have help. This renovation will most likely include professionals for every step of the process, especially if it is your first flip.
Real Estate agents, and professionals dealing with investment properties will have advanced knowledge of advantageous financial opportunities in real estate investments. Subcontractors might be needed for any upgrading needs, roofers, carpenters, plumbers, floorers, etc. Financial professionals to walk you through the process and find the best options for your financial needs.
5. Paying Too Much
If you pay too much at the start you are in trouble, and the whole process will be wasted. Your real estate agent will be able to help you with analyzing what property has the most potential. Make sure that you give yourself wiggle room. Every month the home is on the market after completion is money you are losing from your profits. Your goal will be selling it fast after completion. When you do your real estate comparisons you will be planning on getting the low end of what you think it is worth for the quick sale.
6. Not Having Financial Stability
At the end of the day it is all about the money right? How is this type of investment going to affect your life? Sit down with a financial professional you trust or maybe is recommended that deals with home resale. Go over all of your options on how to best leverage your finances to incorporate this into your investment plan. Be confident going into this process that it is a sustainable endeavour for you. Avoid running out of money in the middle then being desperate to sell when the job isn’t done. That would be a sure way to lose money.
There are opportunities in flipping at many different price points. Feel confident you have found the right price point for your investments.
7. Cutting Corners
Know when you are selling a flip you are trying to sell it fast. Every month it is on the market will bring down your profit. There are ways to make a home show with a wow factor without going over your budget if you plan properly. Make sure the house is updated with current fixtures etc to help the home sell fast!
8. Holding On To A House
Flipping a house doesn’t always go as planned. Did it take you a little longer because of an issue that required more renovations, which in turn has you selling during a slower time in the real estate market? Did your local market slow down all of a sudden? Keep your confidence up by having a plan B if you have to hold a house longer than expected. Every month you don’t sell is a loss in profit. Make sure after all your hard work you don’t start losing money at this point.
The rental market in many areas are very vibrant and you may research how your property would work as a rental property while you are trying to sell. Sometimes that may turn into a good situation for you to own a rental property.
9. Exceeding Renovation Budget
This is last, because it is the biggest flip killer. Make sure you have an appropriate renovation budget! Decide what tasks you are capable of taking on, what you need to hire subcontractors for. This will decide what condition house you want to flip and will save time for you and your real estate agent in the search process. Are you just looking for something that needs a cosmetic update? Or are you looking for something you can really gut and redesign? Take into consideration what can go wrong.
Depending on what you are renovating think of the worst case scenario and budget for it. If the best case scenario happens you will be that much happier with the process.
Jenna Ross https://www.happyplacepm.com/about-us/
Happy Place Property Management
I have been involved in renovating homes, and turning them into rental properties for over a decade. Whether you choose to flip to sell, or flip to rent, the process is the same.
Jennifer Vey – Contributor
Certificate of Real Estate. Held coordinator positions with top national builders for closings, purchasing, and starts. Including working on contracts for subcontractors and field checks.