Even the pros make mistakes. It doesn’t matter how long you’ve been flipping houses; both novices and the so-called experts run into pitfalls on occasion. It’s an inevitability that at some point in your house-flipping career you will goof up, and unfortunately in this kind of business when you do make mistakes, they can be very costly.
That’s why it actually pays to look closely at common mistakes and self-generated problems that are all too typical to the house flipping industry. Learn from the mistakes flippers commonly make and avoid it yourself by reviewing the tips below for what you should not do when flipping a house.
1) Run Out of Cash
It sort of makes sense that you need consistent cash flow to have a business, right? Well, working within the realm of real estate can take a lot of it, and you need to have reliable funding throughout the entire project, or else you risk substantial financial losses.
Always make sure that you have money lined up in advance (and be aware of things like how much tax you’re going to pay). If you’re using a loan to back your project, make sure it’s the right kind of loan and that you’ll be able to repay it timely. Plan ahead and make sure you have extra cash on hand in case problems arise (and they will).
Also, to make sure you understand all the costs involved during a fix and flip, be sure to use an accurate hard money loan calculator.
2) Not Leaving Yourself Enough Time
Proper scheduling is a massive part of house flipping. From getting the contractors to come work on a specific timeline, to getting inspections completed, to closing the sale…When you boil it down to the bare necessities, house flipping is really about proper time management. If flipping isn’t your main source of income, that probably means that you’re spending your nights and weekends on renovations or supervising renovations.
It’s a serious commitment, and if you have financial constraints due to having capital tied up in the project, then you may be in a rush to get everything done and sell the home for a profit. However, rushing through steps can often lead to cutting corners, so it’s in your best interest to take the proper amount of time to get things done right the first time around.
3) Think You Can Do It All Yourself
To be truly successful at house flipping, you’re going to need a team of trusted professionals supporting you. This means you need to carefully vet the right contractor, the right lender and other service providers. If you think that you can do it all yourself, you will quickly be in over your head. Think about the money you can save by doing it yourself, and then weigh that with the reality of having to do it all by yourself. While handling renovations yourself is tempting, and maybe even probable, keep in mind that your goal is to sell the house for a profit, not to swing a hammer because you can. Hire someone with the professional capability to get it right the first time. You’ll save yourself time, money, and frustration in the long run.
4) Believe That You Already Know Everything
This might be the most difficult thing on the list to overcome. After all, you don’t know what you don’t know. When people see the house flipping TV shows, a lot of them think, “That’s easy! I could do that!” Maybe you can, but certainly not without a lot of research, luck, and professional help.
What you see on TV is the result of very careful planning and countless individuals behind the scenes all working in cohesion to develop a polished product ready for television. None of those people just woke up and decided to flip houses on TV for a living. They all studied the markets, made calculated decisions, cultivated proven professional networks, and even then they had to cross their fingers and hope that all the odds would be in their favor.
Do yourself a favor and avoid the common house flipping mistake of thinking that you have nothing left to learn. The market is always changing, which means that even when you have a solid support team surrounding you, and proper financial backing, you still have to pay close to the market and prepare for any potential pitfalls.
If you’re planning to flip a house, make a plan, do the research, keep your ear to the ground, rely on your network, and be frugal when you need to be. Keeping to this kind of mindset will ensure that when you hit a problem that you didn’t expect, or you come across something you don’t have a knowledgebase for, that you can handle it.