Common Mistakes to Avoid When Flipping Houses
Flipping houses can be a satisfying, lucrative way to make money, but there are some common mistakes you should avoid. Read on to find out what they are and how to dodge them.
Don’t Pay Too Much
The entire point of flipping houses is to buy one on the cheap and then sell it for more after renovations and/or a rising market boost the price. Buying a house at too high of a price cramps your ability to do that. And don’t assume that in a thriving market, prices will continue to rise, in turn making up for a too-high purchase price. At best, this means you’ll have to hold on to the property until prices rise, and at worst, you could be wrong about the market and end up breaking even or losing money on the eventual sale.
Have a Backup Plan
Real estate prices are somewhat predictable–but nowhere near entirely predictable. You should have a backup plan in case a house-flipping venture goes badly and the property’s value doesn’t go up as much as you’d planned. Ask yourself questions like: How much of a loss can I take on a property? If the price drops too much for me to sell, could I turn it into a rental unit? If so, will I manage it myself, or will I need to hire a property manager?
Research the Title
Imagine buying a house and then finding out there’s an ownership problem. That’s the kind of snare that can happen without proper title research. Luckily, title companies examine records to make sure sellers actually are the rightful owners. This avoids problems like discovering there’s a lien on the home after you’ve bought it.
Budget for Renovations
Renovations are a critical part of house flipping. They can also be extremely expensive. And estimates–even from experienced contractors–are just that: estimates. Make sure your renovation budget always has some extra padding in case an unexpected cost arises, and go through the effort of developing a good working relationship with a renovation contractor.
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