Looking in from outside, it may seem that flipping a house is a simple task. The process of buying a house, retrofitting and refurbishing it, then selling it to make a profit may seem like a great idea for some persons, but is it really worth it? After all, they make it seem easy on TV.
Well, unfortunately, it isn’t like that in real life. Don’t be disheartened, though; you can find houses that only require you to do a little extra painting. It takes a lot of planning, teamwork, experience, money and resilience to flip a house. That’s why this list below will tell you five mistakes that you should avoid when flipping a house.
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1. Following the 70% Rule
Most people make crucial mistakes at the beginning of the process. It’s best to check the property carefully before purchasing it. First, you need to calculate the value of the repair. Next, you should do a calculation of the repairs after having an inspection done. At this point, you should ensure you take unforeseen costs into the equation.
Once your budget is realistic, you can then apply the 70% rule to ensure the deal is worth it and what your profit margin will be. The 70% rule allows you to have a 30% cushion after selling the house. Approximately half of that will be your profit, while the other half will be legal costs incurred throughout the process.
2. Lack of Experience
As mentioned above, one of the best keys to flipping a house is to have a valuable team. This is the moment where you surround yourself with persons who have experience in the field. It doesn’t mean that you don’t know how to get things done; it’s just a precautionary tale.
However, if you lack experience in any area while flipping a house, you should consider hiring an expert. Getting an interior designer can also help you get unique insights into the types of materials to use.
3. Taking too much or too Little Time
Another major issue you will face when flipping a house is time. The process is very time-consuming and you can determine whether you end your project earlier or later. When you’re evaluating your project, you should ensure you do a time evaluation.
It’s an essential part for you to observe the return on your investment because it costs money each day that you’re working on the house.
4. Making too Much Improvement on the Property
Another important issue you can face when flipping your house is over-improving it. This is one of the chief reasons it is necessary to know the market you’re in.
Taking time to research the best cities for flipping houses will yield impressive results. You can also leverage house flipping software like DealMachine to simplify the process.
5. Not Having an Exit Plan
Although flipping a house is an investment strategy with a clear exit plan, things don’t always happen the way you want. Therefore, making a plan will help to save you money.
However, you don’t want to overprice your house after flipping it because you will end up having trouble selling it. That’s why it’s essential to have a backup plan so that your investment doesn’t go to waste.
If you’re interested in flipping houses, it’s essential that you understand the risks involved and the time you will have to invest in doing it. If you’re a novice, it can cost you more time and money than you originally thought, but getting an expert can help ease these issues.