Let’s be real—fix and flip projects look glamorous on TV, but those who've been in the trenches know it’s not as simple as buying a property, painting a new coat on it, and selling it off for a tremendous gain. The fact is, that flipping houses is a complex process that requires careful planning, a solid team, and a clear strategy. And as a broker, you're ideally positioned to guide your clients away from expensive errors and into bigger profits.
In this blog, we're going to take you through six common fix-and-flip mistakes and how you can steer your clients away from them. Whether they're seasoned investors or first-time flippers, your guidance can be the difference between their success and failure.
Failing to budget in fix and flip ventures is perhaps the biggest mistake. Additional expenses can pop up at any phase, from repair surprises to permitting holdups. Your customers have to account for these expenditures themselves. If not, they can exhaust their budgets and diminish their earnings.
How Brokers Can Help:
Pro Tip: Encourage your clients to invest no more than 70% of the After-Repair Value (ARV) in the purchase of the property and repairs. This leaves them with a sufficient buffer to make a profit.
It's easy to get caught up in the thrill of a new project, but skipping fix and flip insurance is a rookie error. Property insurance covers your clients' investments by paying for damages that might happen during the renovation process.
Why Insurance Matters:
How Brokers Can Help:
Flipping a house is a team effort. Even the most skilled investors can’t do it all on their own. From contractors to realtors, having a reliable team is essential for staying on schedule and within budget.
How Brokers Can Help:
Pro Tip: Encourage your clients to meet with potential team members before hiring them. A good working relationship is just as important as experience.
For first-time flippers, it’s tempting to go big or go home. However, tackling too big or complex of a project can result in expensive errors and setbacks.
How Brokers Can Help:
Pro Tip: Remind your clients that flipping houses is a learning process. Starting small allows them to gain experience and build confidence for larger projects down the road.
House flipping is stressful enough without the added ingredients of personality conflict or mismatched expectations. Be it a friend, family member, or business partner, dealing with the wrong person can tank the whole project.
How Brokers Can Help:
Pro Tip: If clients have a partner they are working with, advise them to make it all written, including profit-sharing arrangements and exit plans.
Perhaps the most underutilized part of house flipping is the use of an exit strategy. Without one, your clients will be left sitting on an unsold property or losing money on carrying costs.
How Brokers Can Help:
Pro Tip: Encourage your clients to consult with a realtor early in the process to get a realistic idea of the property’s ARV and market demand.
House flipping can be very profitable, but it's not without its pitfalls. By assisting your clients in avoiding these six most common fix-and-flip errors, you can position them for success and create stronger, more lucrative relationships.
At RCN Capital, we know the special needs of real estate investors—and the brokers that serve them. Here's why brokers prefer to work with us:
By partnering with RCN Capital, you can provide your clients with the financing solutions they need to succeed in the competitive world of real estate investing.
Ready to take your brokerage to new heights? Connect with us today to discuss our real estate financing solutions and how we can help you grow your business.