What was old is new again, is that how the saying goes? When the housing market crashed back in 2008 it seemed like we would never get back to flipping houses because no one could afford a new home, or a flipped home and supply prices increased.
My husband has flipped his share of properties and we totally know what is involved and trust me becomes an ‘All-In’ kind of prophecy or you will fail. Things have drastically changed again, and the housing market is moving.
People are flipping houses for a living, but some who dive in are naive to the mistakes they are about to make. Novice house flippers are those who have never flipped a house, have grand expectations and the process gets ahead of them. Today I will share with you the 4 costly mistakes novice house flippers make and you can lavishly live life out loud, steering clear from those mistakes in flipping.
4 Costly Mistakes Novice House Flippers Make
The World Of Flipping
House flipping can be a lucrative endeavor, but it’s not as easy as the numerous reality shows make it appear. Novice house flippers can quickly find themselves in over their heads, and it’s important to prepare for every facet of the process before jumping in headfirst.
If you’re considering a foray into the world of house flipping be sure you avoid making these common novice mistakes. The sign above is the sign we all want, once we flip a house, but flipper beware of the pitfalls before you begin.
You are pumped, primed and ready to go, and you suddenly make time promises YOU can’t possibly keep. Don’t let enthusiasm get in the way of proper time management. Making any type of profit in house flipping is dependent on how quickly you can complete the project. However, you can’t sacrifice quality for speed.
Novice flippers make their timeline for completion too short, whether it be due to naivety or unforeseen issues that arise during the rehab process. It can take you months to find the right property, then months to have it rehabbed.
When it does come time to sell, you’ll need to deal with inspections, property showings, and meetings. This can easily take anywhere from six months to a year, especially on your first rehab effort, so be sure you’re creating a realistic timeline when you draw up plans.
Underestimating Monetary Issues
We are not all Sean Conlon and we can’t all be perfect with our art of flipping, but one thing is certain, you have to know your numbers, stick to them and have the money that you will need available.
Flipping houses is expensive. Flipping is not just about the renovation costs because you also will have to pay out taxes on profits to commissions paid to your real estate agent. Most flippers don’t have an endless flow of money, it is about flipping the house and making money, so you have to be crafty with your financing. Don’t count on traditional secure loans from the banks and financial institutions because it won’t happen.
Private funding methods are generally how flippers grab the cash they need to make the flips they are working on happening. Acquiring capital from a hard money lender can be a good option for first-time flippers, especially for areas that feature expensive property pricing.
Booming Real Estate Market
Take Southern California, for example. Real estate there is always hot, and this results in top-tier prices, even for rundown properties. Flippers looking to get started in real estate in these areas often pursue lending from private institutions.
While these types of loans come with higher interest rates, they’re short-term and provide the capital needed to get the show on the road. As time is of the essence, the ease and efficiency of this financing is desirable for house flippers.
Forgoing a Home Inspection
Don’t even try to forego a home inspection or you might again be burning through funds you don’t have for things you did not know about. Do it right the first time.
Before making any type of change in the home you’ve purchased, you should always get a home inspection. We learned this during a purchase of a home and we also were able to use this to walk away from a home because things were not disclosed!
Bargains are bargains for a reason a lot of time, so take the time to learn (we did) Even if you plan on redoing significant portions of the building, you still need to know what you’re up against before starting demolition.
Don’t buy your property as is; getting the home inspected before signing the dotted line can save you from costly repairs and reworks.
From cracked foundations to faulty piping, all kinds of problems can play into your ability to make money with your fix and flip property. An inspector can find issues that give you leverage for negotiations, and you may get that undervalued property for an even better price than expected.
Don’t Do It Yourself
I don’t care how much of a die-hard diy you are, don’t do this flip yourself. If you’ve never flipped a house before, and you don’t have extensive contracting experience, you need to hire a professional to help you.
Remember you have a day job that needs you in order to keep your financial health flowing. Skills matter when it comes to flipping and the regular DIY guy/gal can not get the job done unless they commit to it nonstop and most can not.
However, those with professional carpentry and plumbing experience are likely prepared to take on house flipping, but if you’re moving from software engineering to house rehabbing, you’re going to need to call in the experts.
If you do a shoddy job, you’ll spend more time and money on reworking the issues that arise. Always consult an expert prior to getting started, and if you decide to hire, shop around for the best deal possible.
Now, who is ready to do the flip? It’s about staying on a budget, staying on time, not vesting yourself into the flip and getting the right financing. If you’re looking to make your mark on the house flipping market, be sure you avoid making these common mistakes and ensure your investment is a worthy and lucrative one.