The real estate market is filled with opportunities to make a significant profit from run-down homes ready to be purchased, repaired, renovated, and sold for a much higher price than they were acquired for. Fixing and flipping houses can be a risky proposition, however, and it’s easy to wind up in over your head. Here are five common mistakes to avoid as you embark on your fix and flip investment.
1. Not Having Enough Money
The number one rule with purchasing a fixer-upper to resell is to make sure you have enough budgeted initially for the entire project. Houses can represent a significant money sink, particularly if they are older and haven’t been maintained.
Financing options abound for making the initial purchase, and with sufficient credit, you’ll be able to get a low-interest rate that ideally lasts for the life of the project. Even still, any interest will reduce the overall profit to be had – and it can be significant, with the average ROI in 2019 amount to more than 40 percent.
To know what to anticipate for your costs, do your homework on the property and local contractors’ cost if you plan on hiring out. Before you purchase it, get an expert opinion on the potential pitfalls the renovation project could experience.
2. Having a Short-Sighted Timetable
Time is the enemy of any property flip as the longer a derelict property sits, the more it will cost to fix it – and the more your holding costs will be. Even if you intend to dive right in and start renovating the property yourself, it’s best to develop a timetable when you anticipate tackling different areas. This will help break the project into manageable parts.
If you have the budget and the desire to work with contractors, time is still an important factor. The work will need to be supervised to some degree, and getting contractors on a particular schedule can be challenging in different parts of the country.
3. Unexpected Damages
What’s worse than making a major investment than watching it go down the tubes with one random act of Mother Nature? To avoid taking a significant loss, make sure to purchase property insurance on your fixer-upper. With the wide range of catastrophes that can result from hazards like water damage, this will protect you from losing the value of the home itself.
4. Inadequate Skills
Whether you’re anticipating doing the work yourself or you’re planning to hire a contractor, the right skill set and experience are both imperative to a successful flip. The repairs and renovations will need to be done right the first time to avoid repurchase materials or pay extra in hourly or project costs.
Fortunately, if you’re planning on hiring a contractor, the modern era makes it easy to find skilled, reliable professionals with established reputations for their ability to fit projects within timeframes and budgets.
5. Don’t Go for Generic
If you want your flipped property to be desirable – and you do – then go above and beyond a flat renovation that fails to add any color or imagination to the property. Add flourishes, flavor, or a theme to different parts of the house to let it speak to prospective buyers. The faster they make the offer, the more your profit will be.
While it’s easy to get into fixing and flipping homes, it can be a costly mistake for those who are unprepared. By allotting adequate money, time, and skills for the work, you’ll be better prepared to net a tidy return.