With the number of home renovation shows on TV these days, it may seem like fixing up and flipping homes is a great way to make money quickly. However, it’s not nearly as easy as HGTV makes it look! There are plenty of ways in which a flip could go wrong and end up an expensive disaster. In order to help your flip be more successful, start by checking out these common mistakes flippers make:
First and foremost, money matters. If you don’t have sufficient funds, your project may stall two-thirds of its way to completion. But, before even getting that far, it’s important to have the right financing from the start. Foreclosures and auctions can be a great way to purchase a property for minimal cost, but you’ll need to be able to provide financing quickly — and the traditional loan process is anything but fast. To remedy this, you’ll want to find a hard money lender to work with so you can get financing quickly and be sure it’s the right financing for the project you’re undertaking.
A key factor in making the most profit possible from a flip is knowing when to put the finished house on the market. But you also don’t want the house to sit empty for six months just so you can time the sale better. In flips, timing can make a big difference. If you don’t have the requisite skill yourself, bring a trusted contractor with you to scope out the property and provide you with an educated guess at how long your renovations will take. Of course, don’t forget to factor in things like inclement weather that could also affect the timing. If you’re not sure what the coming trends are in your local real estate market, find a realtor you can trust to walk you through the details.
Are you pretty handy around the house? That’s awesome, and means you’ll probably be able to handle a lot of the details of the flip on your own. However, there is a big difference between being handy and being licensed. When planning and orchestrating a flip, it’s important to know what work you can do yourself and what you should do yourself. The more of the project you can do yourself, the better your profit is likely to be. But if you aren’t a licensed contractor, you’ll need to know what to leave to the skilled professionals and factor that cost into your planning.
You’ve probably heard that saying about the devil being in the details. When it comes to flipping houses, major renovations and repairs matter, but the finishing touches matter just as much. The trick is walking the fine line between finished and too much. For example, unfinished would be doing a total kitchen overhaul, but failing to replace the old, dingy outlet covers and cabinet pulls. At the other end of the spectrum, too much is doing things like choosing fancy finishes for everything. Yes, some high-end finishes are good, but you’ll need to think about what makes sense for the area and the price range at which you’ll be selling. A million-plus home will give you decent odds of recouping that expense, but a $200,000 range won’t leave much room for profit.
Another common mistake many new flippers make is to fail to be discerning about the location, not just the structure of the property itself. No matter how low the price of a home, if the location isn’t right, you’ll have a hard time selling your refurbished property. Be sure to keep in mind the comparable size and cost of nearby homes as well as the local amenities and crime rates. It is unlawful for a realtor to steer you away from properties or neighborhoods because of fair housing laws. You can ask a realtor about local amenities and comparable home prices in the area, but you’ll need to dig into the local demographics, schools, and crime statistics for the area yourself before making a decision on a property.
Of course, without the right financing, it’s hard to even get your project started. If you’re interested in flipping or other real estate investment, start with a solid foundation. Start by talking to the TABS, LLC team to learn more about hard money loan options in Colorado.