Beware Of These House-Flipping Blunders!
House flipping can be an incredibly lucrative way to make money from the real estate market, but like any kind of investment nothing’s quite guaranteed. The swings and fluctuations of the market can be extremely unforgiving, and many would-be house flippers jump right into the market before they’re really ready for it. Of course, we don’t all have the skills and experience it takes to understand the property market like the back of our hands. However, that doesn’t mean you have to sit around putting your dreams on hold forever! To help you get the best start, here are some of the biggest mistakes you can make when trying to flip houses.
The first, and in some cases worst mistake you can make, is trying to do all the work yourself. This is fairly common among people who are completely new to house flipping, and has caused more than a few lover’s quarrels over the years! You’ll probably agree that there’s something very exciting and romantic about fixing up an old house with you and your partner, even if it is just to make a profit at the end of it. As you can imagine, if you do all the painting, carpeting, installing and so forth yourself, you’ll stand to save a pretty decent amount of money on the labour costs. However, you’ll also stand a chance of driving yourself to the brink of sanity with all the stress ahead of you. Instead, I strongly recommend that you carve off a decent amount of the budget and use it to pay contractors to do the bulk of the work, and assume the role of “foreman”. That’s not to say you can’t take part in one or two jobs. In fact, this can be a good way of learning more about the flipping process first-hand.
The next big mistake you could make is not researching the state of the local property market. Taking this step requires a fair bit of research and learning, but it’s necessary if you want to maximise your chances of turning a decent profit. Unfortunately, there’s no “magic” house size or layout which will always sell no matter what. Some attempted flips have been known to half the value of mansions, and others have been known to double the asking price for grimy little shacks. Despite this, every area has certain characteristics which will bump up the value of a home. Getting this down to a tee will be pretty time consuming, but you can make a pretty good start simply by talking to a local real estate agent, and asking them about the common threads in the houses that sell in the area. The biggest factors are usually the number of bedrooms and bathrooms, coupled with features like garages and pools. Visit www.taylorsestateagents.co.uk/forsaleoffice/northampton/248/, have a look at some of their properties, and see if you can find any common threads in a given area.
Another fairly prevalent mistake is completely ignoring the neighbours. The worst thing you can do when you’re making any major deal in real estate is forget that old rule of “location, location, location”. The state of the neighbourhood where a property is can completely make or break your attempt at flipping it, so make sure you factor this in when you’re looking to buy properties. If you’re an experienced decorator, contractor or whatever else, then you may feel like you could completely turn around the ugliest home on a street. However, I wouldn’t buy into the scheme without having a look up and down the street. Sure, you may be able to make an ugly home unrecognisable; I’m not doubting your abilities here! However, it could all be for nothing if the house is in a bad enough location. http://www.manchestereveningnews.co.uk/ had a pretty helpful feature on this factor.
Another mistake you really need to avoid is going overboard on the upgrades. This might sound a little backwards, I know. You’re supposed to buy low, add as much to the house, then sell it for a considerable profit, right? Well, not necessarily. It seems that a lot of hopeful house flippers these days have had their perception completely ruined by all those remodelling shows on TV. I’m guilty of watching these myself, so I get where the problem comes from. You see some great idea on TV, get inspired, and sink a lot of time and money into trying to recreate it. You might get the home looking absolutely stunning, but the cost of all the extras can be incredibly hard to make up for when it comes to selling. Sure, it may be very popular and a quick sale, but you need to make sure you’re able to make at least a small gain on all the work you’re doing. Even experienced property investors have been known to over-step themselves from time to time, so make sure you approach this very carefully. The best way to make sure you don’t make a home “too nice” is by checking out some comparable sales, and finding out what properties are in high demand in the area.
Finally, underestimating the cost and time it takes to successfully flip a house. Of all the rookie mistakes, this is one of the simplest to avoid. Depending upon where the house is, your costs on various things will vary of course. If you’re in LA, plumbers in Los Angeles might cost more than ones in the suburbs so try and get quotes from people in the exact area. However, if you do slip up, it can still be extremely damaging. You need to be very careful when estimating how long it will take to flip a given house. Make sure your logical planning meshes well with what the reality is going to be. If you’re estimating that it will take 2 days to paint a house and another one to carpet it, then leave time for about six days. The same thing goes for the budget. You don’t want to run out of money, and leave some important job half-finished! As a rule, double your budget and your timeline in the initial planning stages.
There you have the biggest house flipping mistakes you need to avoid. Steer clear of these, and your property investment will run much more smoothly.