Are you considering buying your first home to flip? While house flipping can be a great way to make money, it can also be full of challenges. In fact, there are many ways in which your first home flip could go wrong. While that doesn’t mean you shouldn’t invest in a home to rehab and resell, it does mean that you should be aware of common pitfalls. Set yourself up for success by avoiding these house-flipping mistakes.
Not having enough money
When you flip a home, you need to consider more than just the purchase price. Obviously, you will need to factor in all the renovations that need to be made. But those aren’t the only costs you will incur. You also need to be prepared for taxes, inspection and appraisal costs, permit fees, agent fees, title searches and other closing costs. Do your research so you know approximately how much each of these items will cost. And then add an additional 10 to 15 percent on top of that. There’s nothing worse than coming up short when you’re in the middle of a project.
Skipping the home inspection
While it may be tempting to forgo the home inspection, that would be a rookie mistake. Getting a home inspection alerts you to all the potential issues in a home. By getting a home inspection, you will better understand the costs involved for the renovations. You may also be able to negotiate with the seller for a lower price. All of this can and will affect the profit you can potentially make when the home sells.
Lack of skills
There are some home renovation projects that can be fairly easy for a novice to undertake. And there are some that are not. Don’t overestimate your skills and what you’ll be able to reasonably handle. Know when to call in a professional to get the job done right. And remember – for each professional you need to hire, it will mean less money in your pocket in the end. So choose your projects wisely.
Choosing the wrong partners
House flipping is difficult to do all on your own. Because of the investments of time, money, and skill, you’re better off working with partners. A partner can help with the investment or the renovations – but be smart about choosing your team. This is especially true if you are partnering with friends or family. You don’t want to ruin a relationship over a real estate investment.
Not knowing the market
Finally, it’s essential that you understand the local real estate market when you’re flipping a house. Take time to research current trends and know what comparable homes in the area are selling for. You also need to understand who your potential buyers may be when you’re making decisions about renovations. Choose amenities and décor that will appeal to them. Don’t make the mistake of making choices that appeal to you, since you are not the one who will be living in the home.
The bottom line is that house flipping can be a great investment if you know what you’re getting into. When you’re first starting out, it helps to know what problems may arise so that you can avoid them. Follow the tips above to help make your first house flip a success!