What to Avoid When Flipping Houses
For real estate investors, flipping houses can be rewarding. When done correctly, it has amazing potential for turning a profit. However, there are several mistakes that investors make, especially when they are just getting started. Below, we’ll go over the top 4 mistakes you’ll want avoid when flipping houses.
Top 4 House Flipping Mistakes
Purchasing too many properties
One of the first mistakes that new investors make is purchasing too many properties at one time. While there’s nothing inherently wrong about working on more than one property at a time, it is possible to spread yourself too thin. As a new investor, you’ll want to start out slowly and once you get comfortable with it, you can expand. Flipping houses requires a lot of work and you want to make sure you have plenty of time to complete a project before you take on new ones.
Underestimating remodel costs
The second mistake that new real estate investors make is to underestimate how much it will cost to remodel/renovate a property. They purchase a property because it’s cheap without thinking about how much work needs to be done on it. This typically results in them taking on a project that they can’t afford. Most of the time, house flippers don’t have a big budget when starting out, so they don’t have the cash flow to complete a major renovation or remodel. You must be aware of every dollar that you will spend. Therefore, before you purchase a property, you want to get some estimates from contractors and if it’s more than your budget allows, you’ll want to keep looking.
Try to make money on the back end
One of the most common mistakes made by new real estate investors is that they attempt to make money on the back end. They purchase a property that may not be a great deal, thinking they can improve it enough to make a profit. However, while it’s possible to increase the value a little, it typically won’t be much more than you put into it. When it comes to flipping houses, you make your money on the front end. You’ll want to spend some time looking for undervalued properties in your area, trying to buy them as cheaply as you can. Then, you can do the work and sell it for closer to the actual value.
Taking on more than they can handle
In addition to buying too many properties, new real estate investors often take on a bigger project than they can handle. Things like flooring, paint, siding, and room renovations are easy to do. However, if a property has foundation issues, mold, or other major flaws, you don’t want to bother with it.
If you are ready to get started in the world of house flipping, contact TCF Capital today. We will be happy to give you the guidance you need to get started.