7 Mistakes Rookies Make causing a House Flipping Flop!Feb 17, 2022
Most real estate investors make common house flipping mistakes. They are easy to avoid but devastating when they occur. It affects both experts and novices, and unfortunately, they rarely recognize it as a mistake. Instead, when bad luck strikes, house flipping investors tend to blame the economy, the real estate market, or just plain bad luck.
The truth is that this error can affect any property owner who is trying to sell their home, and it has nothing to do with market or economic conditions. The fact is, many investors make this mistake due to their lack of knowledge.
If you want to venture into this millionaire's playground— we sure won't stop you! — but before you jump into your very first home flip, make sure you know what common mistakes first-time flippers are in danger of making so that you can avoid the same fate.
1. Not securing the right permits.
It's a good idea to figure out which permits you'll need for your upgrades before you start pulling out the sledgehammers for demolition. You don't want to finish a project only to find out that you needed a permit and that you'll have to redo some or all of it.
Again, a real estate professional or a real estate coach with previously flipped houses can assist you. They'll know what permits you'll need and can assist you in starting the application process before you need them (not after).
2. Remodeling according to your taste
Many first-time flippers forget that they are renovating the house for a future buyer, not for themselves. And because they insist on remodeling the home according to their own personal taste rather than what sells best on the market, those flippers end up getting less for the sale than they could have.
Your real estate coach can help you get a grip on reality and tell you whether your desire for a separate kitchen, dining room, and living room will hurt the sale or whether there is a demand in the area for a garage with a rock-climbing wall installed.
3. Not Having Enough Time
Flipping houses is a time-consuming endeavor. First, finding and purchasing the right property can take months. Then, once you've purchased the property, you'll need to devote time to repair it. If you work during the day, time spent on demolition and construction means weekends are lost. Even if you hire someone, you'll still spend more time supervising the activity than you anticipated, and the costs of paying others will reduce your profit.
Once the work is done, you'll need to schedule inspections to make sure the property complies with applicable building codes before you can sell it. If it doesn't, you'll need to spend more time and money to bring it up to par.
Then there's the matter of selling the property, which can take a long time. You may spend a lot of time commuting to and from the property and in meetings if you show it to potential buyers yourself. In addition, you will owe a commission if you use a real estate agent.
Many first-time flippers believe they are capable of completing a rehab without the assistance of a team. However, regardless of what they think they know, most new investors will be better off working with an established team. While some people can flip a house on their own, a great team is unquestionably better than going it alone––after all, real estate is a people business.
Avoid this by carefully calculating all of your numbers and sticking to your budget. Don't make the mistake of thinking you'll be able to sell your home for more money than everyone else in the neighborhood or that you'll be able to find lower-than-market labor rates to save money. Instead, listen to the numbers and follow their advice.
Don't try to do everything yourself. If delegation doesn't come naturally to you, now is an excellent time to practice learning a new skill.
5. Not Getting a Home Inspection
House flipping is a makeover—not a complete rebuild. So you need to get it checked out before you buy. Inspections can reveal a variety of issues. You won't be concerned about some problems, such as cabinet doors that don't close properly, if you plan to rip and replace the kitchen anyway. Others, like a cracked foundation, can be extremely costly.
At the very least, an inspection can reveal flaws that can be used to negotiate a lower price. Every dollar counts toward your bottom line; any money you save on the purchase price will go toward making a profit when you flip.
6. Being a Jerk
Even if you're determined to do it all by yourself—after all, you're a pro at mitering crown molding—successful flipping necessitates some level of collaboration with others. So you'll need to assemble a reliable team of craftsmen, suppliers, lenders, and real estate agents who you can rely on time and time again.
Not only must you find people you can rely on to complete the project on time and budget, but your teammates must also be able to trust you to treat them with respect, pay on time, and not make their lives a living hell by changing your mind repeatedly.
7. Lack of Exit Strategy
You may be in more danger than you realize if you don't have at least one or two exit strategies. For example, a lease option, wholesaling the property to another investor, renting the property, or various other methods could be used as exit strategies. The key is to have not only a plan but a few backup plans as well.
Consider your possible exit strategies before purchasing a property to avoid making this mistake. It would help if you were thinking about your exit strategies before buying a property to flip. If you can't develop a good exit strategy, you might want to look for a less risky deal.
If you're considering flipping a house, make sure you know what it takes and the risks you'll face. Novice flippers may overestimate their skills and knowledge while underestimating the time or money required. Flipping a house for a quick profit is not as simple as it appears on TV.
Is house flipping right for you? Consult the expert, Phillip Warrick.