The first lesson new house flippers need to learn is that flipping homes is more than a hobby, and it’s not as easy as it looks. To prosper, you need to view flipping as a business and you must take it seriously. You can start on the right foot once you know the top four house flipping mistakes to avoid.
Not Making a Business Plan
Developing a strategy is an essential part of any business, and house flipping is no different. Figure out your budget, market, and most importantly, your projected return on investment (ROI). This plan will help you estimate your timeline and understand the potential costs associated with repairs. You need to be aware of any risks you’re taking so you can manage them properly.
Flipping a home can quickly spiral into thousands of dollars more in repairs than you expected. When this starts to happen, your ROI diminishes greatly, and your best hope may be no better than breaking even. When you tour the home, make sure you bring a contractor with you to get a sense of necessary repairs and their associated costs.
Over-Improving the Home
Real estate is known for being a bit counterintuitive, as there are tons of repairs that don’t do much to increase a home’s value. Your best bet for learning what improvements are necessary is to look at other homes in the area. If no other houses on the block have a wood-fired pizza oven, you probably shouldn’t invest in one.
Spending Too Much
The safest way to ensure a good return on your investment is by getting a deal on the front end. Always remember the 70 percent rule: never spend more than 70 percent of the projected after-repair value when purchasing a home. If you want to be sure you’re getting a good deal, think about buying a foreclosed home to flip.
Now that you know the top four house flipping mistakes to avoid, get ready to make a profit!