Many real estate investors have been very successful flipping houses. It’s a great way to make a living, or even for an added stream of income. However, there’s a lot that goes into flipping houses. Searching for the right property, negotiating, and managing the remodeling process from start to finish takes a lot of time, money, and focus. If you’re considering investing in real estate to flip houses and want to do it the right way, here are 5 common mistakes to avoid for a successful house flip.
Overspending or Underestimating Costs
One of the most common mistakes people make when flipping houses is not budgeting correctly. There are a lot of expenses that can fluctuate during the process, so it’s important to set aside enough money for unexpected costs. However, you don’t want to end up overspending and lose your profit. Real estate professionals recommend not spending more than 70% of your projected after-repair-value (ARV) when buying a property. This ensures you have enough buffer room to complete repairs and still make a profit.
Taking on Too Big a Project
If you’re just starting out, it’s best to keep your flips manageable. It can be an exciting endeavor to flip your first house, but taking on too big a project can come back to bite you. Start slow with properties that need minimal work, and gradually work your way to a bigger project.
Over-Improving the Home
When flipping a house, you need to know what repairs are necessary in order for the end product to align with comparable properties in the area. Adding luxury features typically isn’t necessary if other homes in the neighborhood don’t have them too. This can actually make it harder to sell the home in the long run.
Not Knowing Your Market
Understanding the local market is critical before flipping a home. You need to know what other homes in the area are being priced at, what buyers are looking for, and market trends. There are a number of factors that can impact the housing market, so be sure to have a good understanding of the dynamics of the housing market in your area. Hiring a real estate agent can help you navigate the market and make you a more informed investor.
Not Selling the Home at the Right Price
Pricing is important for any property, and it can be especially difficult for new flippers. Choosing the right price depends on how much you put into the house, location, local amenities, and taxes. Overpricing a home will just mean more time on the market, which will chip away at any potential profits. Additionally, leaving a home on the market for too long can be a red flag for potential buyers. In order to ensure you’re pricing a property appropriately work with a qualified and experienced real estate agent. They know what it takes to sell a property and will have knowledge of the local market and pricing that can be very helpful to beginners.
Many investors don’t get the flip right on the first try. Like any new endeavor, flipping houses will take time and practice to become skilled at. Working with an experienced real estate agent can help you learn the ins and outs, and doing your homework about the market can help you become a more savvy investor down the line.
Looking for Funding for Your Next Fix and Flip Project?
RCN Capital offers short-term and long-term financing options for real estate investors. Whether you are looking to fix & flip properties or hold properties for rental income, RCN has flexible options that are suited to your needs. Connect with us today to discuss your next fix & flip investment.