House flipping has grown rapidly since the 2000s. To the beginners, let us tell what house flipping is all about before going into the topic. This refers to the act of buying a house or any other real estate property and quickly reselling it (flipping) to make money faster. Some of the home buyers would choose to purchase a distressed home or property for fewer costs and will transform it into something worthier for reselling. Although it may seem easier, this process can be potentially messier. Our expert team at Top Remodelers has come up with the following article to inform the people about the top mistakes that can be avoided while flipping a house. Read them and get benefitted….
Putting the whole task into your head:
We would say that this is the worst possible mistake one can do while flipping a house. Deciding to do the whole task by yourself or with little help won’t work many times in the process. While you might be thinking to save money by avoiding a professional help, we would say you are going to actually lose. Remember, the whole process of house flipping involves a thorough thought process and hence, it’s nearly impossible to perform the role of a contractor while flipping a house unless you are one. We would say the whole task will be overwhelming to you and all the hard work you put into the process will go worthless. Getting a professional team to work for you is the best way to make your project work for you.
Overpaying a property:
The whole idea of flipping a house is to make a good profit. But, several people, especially the first-timers are failing to generate a good profit in house flipping. Several of these cases show that the home buyers are overpaying for a property, which is why the profit is diminished. You need to understand that it’s easy for you to take emotional decisions during the larger transactions and this would keep you away from proper negotiations. Remember, if you want to make some good profits in house flipping, you should do your homework and get to know about the status of current home sales.
In this, pay attention to the prices of the properties in your neighborhood and compare your call with those prices. You can also have a good contractor to look over the property and get an estimate of the repairs that need to be performed. This would help you come to a reasonable deal.
Ignoring the time factor:
It’s easy for a home buyer to easily estimate the time required for the renovation project to complete and to put on the open market for sale. We agree that the time goals are important in any project, no matter what it is. But, don’t ever take unrealistic decisions. While deciding the time frames in house flipping, try to be as realistic as possible. If you need time to set up time goals, take it and plan for the good. Also, remember, in the house flipping process, you should not give room for more time than actually needed. This is more important for the people who have borrowed money from the lenders because the loan will be expected to be paid after a certain period. The longer time you take, the more interests you will have to pay the lenders.
Not having enough capital:
Purchasing a property to flip needs you to have a reasonable amount of money with you. Firstly, you need to buy the property and make sure you are covering the closing costs linked to the property acquisition. Then, you will also require money to cover the materials, as well as labor costs for transforming the property into an attractive one. Apart from these, you are advised to keep some money as a safety margin to cover up any unexpected costs that come along the process of house flipping. Remember, if you run out of money at any point during the house flipping, then there are higher chances that it may fail. You may not be able to sell the property at top dollar if you are meeting the time aspect properly.
In order to avoid all these, we would advise you to calculate the total costs by totaling the buying costs + renovation costs + margin of safety before getting into the process. The renovation costs are easier to calculate by hiring a professional contractor to give you an estimate.
Not having a backup plan:
Yes, we agree that the whole idea behind your house flipping is to resell it for good profit. However, we want you to be more and more realistic about what might actually occur. Not all the times you can find a buyer quickly to purchase your renovated property. Sometimes, you might have a tough time reselling it than you imagine. In such a case, if reselling the property is the only option you have, you will be in trouble. If you are in a loan, then you will have to pay the interests from your hands, which would make your whole idea a flop. We would encourage people to always have a backup plan to avoid losses in house flipping.
A good backup plan can include the idea of renting the property to pay the loan until you are able to find a buyer for it. Alternatively, you can also wholesale the property to another investor to at least get some of your money back. Whatever it may be, an exit strategy is essential here!
Ignoring the neighborhood:
We have already spoken about the importance of getting to know about the current prices of properties in your neighborhood. We are reiterating the same point here. In addition, we would also ask you to do some research to determine whether your home buyers will find it desirable. Remember, as you are planning for house flipping, it’s not enough that you like the neighborhood. Your potential home buyer should also like it and find it a desirable place. It’s therefore important for you to do perform some research and get to know about the locality and the residents there.
Not aware of the permits and ordinances:
In the U.S., each and every state and city has its own set of ordinances and permits when it comes to construction. It’s important that you get to know about these and follow them strictly during your house flipping. Failing to do this will put you into a huge trouble because the governing bodies will ask you to pay a hefty fee or will even shut down your project on the whole. If it happens this way, then your whole idea of flipping a house will be a flop. It’s always good to start the project by learning about the building laws in your city and getting the appropriate permits right from the first step.
Designing as per your taste:
In the case of house flipping, you are not going to stay in the house. This point has to be kept in mind when you go through the renovation process. You might love dark colors for your living room and like it to be custom-designed. But, this may not be the case with your potential home buyer. Therefore, you are always recommended to have a neutral design so that the homebuyers get the chance to imagine themselves being there with their own customizations in place.
If you need more help with the house flipping process, feel free to reach us 24/7 at 1(214) 303 97 71.