Flipping houses requires skills that take years to build, and you can’t expect perfection on your first investment. The first key to being successful is making sure that you buy the right property. A surefire way to kill the deal before you begin is to buy the wrong one. However, you shouldn’t be so caught up in fear that you shy away from investing altogether. Take this time to learn. There are so many resources around for you to learn the business. There are television shows, online blogs, articles, magazines, books, and e-books. It is going to take time before you become comfortable applying these skills in real life, and even longer before you master it. Get ahead of the game and start learning all you can about construction as well. Here are some mistakes that property flippers sometimes make that you should avoid.
One huge mistake is getting After Repair Value (ARV) online. Yes, we are fortunate today to have websites like Trulia, Zillow, and Realtor.com that give us comps on houses. However, these numbers should not be taken at face value. They should not be the only place where you are gathering this important information. You must talk to real estate agents to get the most accurate and up-to-date numbers. Otherwise, you’re going to end up in a heap of trouble.
Not trying your hand at the 70% rule is another common mistake. This is a great method that many property flippers sometimes use to figure out how much they’re able to afford to purchase a specific house, and what they’d be able to spend renovating it. If you don’t have the money, you might have to pass up the deal, even if its a great one. Don’t just buy a property and hope it turns out for the best.
Be sure you’ve got a way to finagle out of the deal if you have to. Some known exit strategies are selling the property to another investor, leasing it, or renting it out. If you can’t find a way to get out of the investment deal if you need to, then you should not proceed. Things happen, and you don’t want to end up in a rut.
Renovating a property is not a one-man job. Sure, its doable..but for practical and financial purposes, it isn’t a great idea. You should spend time networking with people in the industry. Meet some real estate attorneys, CPAs, general contractors, and real estate agents, to name a few of the trades.
Don’t put everything you’ve got into an investment deal. Now isn’t the time to deplete your bank account. Usually, if you’ve got to force something too hard to make it work, it isn’t meant to be. Most property flippers have several properties going on at one time. Rarely do they “make it big” on one property, and then never have to work again. Property flipping is a process. You don’t want to put everything you have into one deal and have nothing left if it fails.
Don’t let your head get too big and think you know everything. Chances are, you don’t know how to install kitchen cabinets. You cannot manage a home renovation by yourself. You’ll need a team. The home has to be renovated to code. This means that you’ll need to be working with plumbers, electricians, and contractors, for example. The bottom line, is that property flipping can be a great career. However, you can’t let fear get in the way, and you cannot be a stubborn know-it-all. Don’t be afraid to network, and learn from those who have mastered the skill.