Being a house flipper is a lucrative and rewarding endeavor. That said, if you hope to make the most of each investment, there are a few oversights you should learn to avoid. Delve into some of the common errors novice house flippers make so you can steer clear of them.
Failing To Create a Business Plan
One common mistake new house flippers make is failing to create a game plan for their investment. Think about it; you wouldn’t establish a small business without carefully plotting out each aspect of it. So why would you dive headfirst into an enormous real estate investment without consideration for your budget, project timeline, potential resources, and financing options?
Taking the time to draft a business plan that includes this information will help you organize your project. A good business plan will also help you anticipate any delays or expenses that might arise if your flip takes longer than expected.
Investing Without Doing Adequate Research
A lot of novice flippers fail to adequately research a property before investing. To illustrate, suppose you find a house that appears to have no significant issues. It looks up to date and seems to be in a nice enough area. Your realtor assures you it’s undergone the proper inspections, so you buy it in good faith.
However, when work begins, your crew starts to uncover several structural compromises and issues with the electrical wiring. These things add up, and more time and money go into your flip. Before you know it, you find yourself in a financial hole. This is why it’s so critical for flippers to do their due diligence before investing. Please don’t settle for outside parties telling you it’s profitable.
Go the extra mile and see for yourself. Hire your contractor to do an inspection. Carefully tour the property before making a final decision. Most importantly, walk into the situation knowing what makes the property a good investment. Doing this will help you save time and money, which are two precious resources necessary for a successful flip.
Not Defining an Exit Strategy
House flipping is a significant undertaking that requires planning in all project stages. This includes having a solid exit strategy for your investment. Neglecting this aspect of a flip is a common mistake new house flippers make. So be mindful; your investment doesn’t end once the work on a property is complete.
You also need to assess how you plan to market the home and how much it’s worth once everything is complete. Plus, if you expect to see any substantial profit from your venture, you must have a strategy for repaying your loan and generating a return on your investment. All of this is vital to the success of your flip, so ensure you have a proper exit strategy.
