The 5 Most Common House Flipping Mistakes
Whether you are an experienced fix and flip investor or you are a first-time house flipper, you want to make smart decisions with your real estate investment. There are several common house flipping mistakes. You’ll want to avoid these blunders to make your property as successful and profitable as possible.
According to the fix and flip investment experts at PropertyLark, here are 5 common house flipping mistakes you should try to avoid:
1. Poor Budgeting
Many novice house flippers will make the mistake of not budgeting enough money for their fix and flip investments. The first and most significant expense will be the purchase price of the house itself. If you are financing the deal, then you also have to factor in interest rates. It’s important to run detailed analytics before buying any investment property. This will help you avoid overpaying for the home or running into more renovation expenses than expected. You will want to set a comprehensive budget and try to stick to it as closely as possible to avoid losing money or cutting into your overall profit.
2. Not Conservative Enough
When setting your budget and running your property analytics, you must have an ultra-conservative approach to your projected expenses and returns. There are almost always some surprises along the way that can destroy your original budget, so build in some wiggle room. Whatever you think it will cost you to make all the necessary renovations and upgrades, increase that projected total. Add 10-20% on the budget, just in case. Likewise, be conservative on your anticipated resale price. Don’t assume you are going to get top dollar for the property when it is ready to sell. Project the lower end of the expected price range. If the low end of your resale price estimate minus the high end of your purchase price plus projected renovation costs doesn’t exceed your target return on investment (ROI), then it is probably not a smart investment.
3. Not Enough Time
In addition to under-budgeting, another mistake often made by house flippers is not factoring in enough time. Again, surprises almost always come up and delays commonly happen during a major property renovation. Just as you should be extra conservative with your projected renovation costs and resale price estimates, you will want to make sure you build plenty of time into your investment plan. Expect it to take longer than expected. Taking too much time to complete a renovation or get the property sold is a common source of lost profits for many inexperienced house flippers.
4. No Patience
We see it time and time again. Things go off track during the course of a renovation or resale. The investor will panic and make poor decisions because they don’t have enough patience to deal with complications. Hardly any house flips ever go exactly as planned. This is why you build cushion into your budget and time outline. This is why you do your research and run detailed analytics to protect yourself as much as possible from these costly house flipping mistakes. This is why you must have some level of patience to make smart decision as unexpected surprises come up along the way.
5. A Lack of Knowledge and Experience
Let’s face it. Experienced real estate investors will have a leg up on someone doing it for the first time. They’ve done it before. They’ve learned from their mistakes. They’ve refined their investment plans and analytics processes, and they know when and how to save money during renovations by not wasting money on unnecessary expenses. That doesn’t mean you can’t be very profitable as a novice house flipper. It just means you want to be super careful and know that you will probably make some mistakes along the way. We all do. If you follow these tips above, you should still be able to be profitable. Then, the more you practice, the more you will learn. Over time, you can become a very successful fix and flip real estate investor.
If you are looking to get the most out of your investment properties, you’ll want to join the PropertyLark home buying network. We have built a system that offers you all the resources, analytics tools and home search capabilities that will help you be a more successful real estate investor. Whether you are a first-time house flipper or a seasoned investor, PropertyLark will help you reach the next level of success. Fill out our contact form and brief buyer questionnaire to see if you qualify for our elite network!