Flipping houses can seem like an easy way to make money, but there are several things you should avoid if you want to be successful. Here are three mistakes that new house flippers make — and how to avoid them.
They Don’t Set a Budget and Schedule
The single biggest mistake that new home flippers make is going over budget and running behind their proposed schedule. Time is money, and the longer you spend renovating a property, the more money you will also spend not only on the renovation but also on the utilities and other expenses. This will eat into your profit margin. It is important to work out a schedule before you purchase a property and consider it when presenting your offer. You should aim to stick as closely to your proposed time frame as possible and be realistic.
Likewise, the builders and contractors you hire to help you with your renovation could make or break your intended deadline. It is crucial to work with reliable contractors who understand the project and what you expect from them. Ask your real estate agent or friends and family for reliable contractor recommendations, and be sure to interview several before you make your final decision.
They Don’t Learn the Local Market
If you’re flipping houses for profit, you need to know where the most desirable neighborhoods are. This will not only ensure that you get the best resale price possible, but also that you sell the home more quickly. Many inexperienced flippers forget that a successful flip starts with the right location. If you find a home at a good price in a sellers market, you will have to spend a lot less energy selling it for a profit than a home in an undesirable location.
Don’t fall into the trap of not researching your potential flip market. The best opportunities to make a profit are in neighborhoods that have excellent local amenities such as highly rated local schools and hospitals, as well as retail and entertainment venues.
They Don’t Target the Right Buyers
One of the biggest mistakes a new real estate flipper figure out who their target clientele is. It is crucial that when you renovate a property, you have a clear idea of who your potential buyers will be. For example, if the home has several bedrooms and a large yard, you can assume it will attract a family and therefore should have access to a good school.
Another mistake that new investors make is not renovating the home with the potential buyer in mind. Instead of designing a unique space with lots of individuality, it is important that when flipping a home, you keep it simple. Potential buyers may find it hard to see past elaborate design features that aren’t to their taste. To sell a house quickly, it is crucial that when viewing, people can visualize themselves living there.
A good rule of thumb is to use a neutral color palette and clean, simple finishes so that the home appeals to the most buyers possible. When you first start designing the home, you must create a budget — and stick to it. Renovating a property with luxury materials is not necessary unless the house is a luxury property and you are confident that you can recoup your investment when it comes time to sell.
Flipping homes is a business and should be treated accordingly. Rookie real estate investors often focus too much on the details and fail to look at the bigger picture of their investment. Although it is impossible to eliminate investment and renovation risks entirely, you can reduce them by thoroughly researching the local market and treating each decision like an intelligent businessperson.