Ever since house flipping became a “thing”, thanks to reality television, many people have come out to try their luck with it.
Many of them have the desire to do it, but it takes a whole lot more than that to succeed in house flipping.
You first need to understand the hard realities of the business as they can be cruel if you go about it without much of a plan.
And aside form thinking negatively and thinking that you cannot do it at all, the second worst thing you can do is thinking with your heart.
When you’re buying a house you’re going to live in, that’s a whole different story. But with a house you’re going to fix and flip, you need to cast emotion aside and think with your brain.
So whether you’re on your first flip or your fiftieth flip, as much as possible to avoid these 7 mistakes.
How to Estimate Rehab Costs!
Estimating rehab costs accurately can make or break your real estate business, and it takes years of experience for even the best rehabbers to master the art. However, you can expose yourself to less risk and get more accurate with your projections by learning how the pros think when estimating construction costs.
1. Lusting After Property
This often happens when you find what appears to be the perfect house. It’s the perfect flip you say to yourself.
Never ever buy property that breaks the house flipping rules. It doesn’t matter whether the house is located in a great area or has some unique selling points. Don’t purchase property with your heart, use your brain.
2. Doing Everything Yourself
Many house flippers imagine walking into a dilapidated piece of property, sweeping away the dust, adding a new coat of paint and selling it in under 30 days. Good as new.
Unfortunately it’s never that easy….those ar ethe houses that the retial sector buys.
To get maximum value, you need to buy ugly and then rehab pretty.
The problem is rehabbing a house is not an easy process and even the most experienced contractors will tell you it’s impossible to do it alone. You need to have experience in plumbing, electrical work, interior design, carpentry, masonry, not to mention some engineering and architectural skills to boot.
Chances are you dont have all those…
It would be really unfortunate if you found out three months down the line that you weren’t the septic expert that you thought you were.
Don’t try to do it all yourself. Hire a great team and factor those numbers into the equation. If you do it all by yourself, you’ll end up eating yourself alive and eating up all your profits at the same time.
3. Spending Too Much Money
You might be one of those house flippers who wants the best of everything in your new flip.
Or on the flip side (no pun intended I assure you), you may be one of those who wants to cheap and put in the shoddiest of everything.
In my experience, it’s the first group I see more of these days.
Unless you absolutely need to, there’s no point in spending over and beyond your budget. There’s a limit as to what you should spend. For instance, it doesn’t make sense to spend money on expensive improvements if a house is located in a lower-income neighborhood.
You likely won’t get a return on investment. Consider the neighborhood and ask your realtor what they think. Notice what other houses have in the area and blend in. You don’t want to be the most expensive house on the block so don’t overdo it unless you’re assured that you’ll get your money back.
4. Throwing A Tantrum When Things Go Wrong
Things sometimes go wrong in house flipping. So don’t become one of those guys who loses it when things go wrong.
I have news for you: tons of things will go wrong…you just have to be able to deal with it and move on to solutions.
Problems are the nature of the house flip business.
However, you should let your emotions guide how you react to unforeseen problems. Anything can go wrong during rehabbing, buying or selling. In some cases, it might even take you longer than you anticipated to find a house you can flip. It happens.
So rather than get upset, keep calm, keep working and wait until you find the right property.
5. Being Greedy
I get it.
You want to get into this business to make money.
That does not mean you should become greedy though.
When you sell, you should never price the house so its above market, you’ll simply lose the interest of many potential customers.
To avoid re-pricing the property, listen to your listing broker and look at the comps he or she presents to you and make sure the comps are really similar to your new house.
Then for a fast sale, price the house slightly below the market so you can sell it fast, minimize your soft costs and move on to your next flip.
6. Thinking House Flipping Is A Get Rich Quick Scheme
If you’ve been reading this blog long enough, you probably realize that house flipping is NOT a get rich quick scheme.
Don’t be deluded and think that flipping houses is a get rich-quick-scheme. If you do think its this way, do some more reading here.
House flipping takes time and a lot of hard work. If at all there was a shortcut or some hidden secret that can make you a millionaire overnight, everyone would take advantage of it.
The only way you can make money in real estate is to buy right and be smart. Don’t fear failure, because you will fail. You just have to get right back up and start swinging again.
Put in the time, the effort and the 10,000 hours. Get to work.
7. Being A Slacker
No offense, but one problem many house flipping beginners face is being a slacker.
They spend a lot of time doing research and learning all there is to learn about house flipping…but they never actually DO anything.
They may say “I have no money” or “I don’t have the know how” or “I’ve never done it before”.
Everyone who ever did anything in their life at one point in time they had never done it. Think about it.
Everything you now know how to do really well, there was at one point in time in your life, a time when you didn’t know how to do it!
Right now, I’m typing on a laptop…when I was seventeen, I couldn’t type.
Three years ago I barely knew what a “blog” even was…now I write all the time here and all over the Internet.
And six years ago…I had NEVER flipped a house. This year, I’ll flip at least two dozen…if not more.
You might learn a lot of theory from your couch…but you learn even more when you get out there and start flipping houses.
Don’t be a slacker…just do it!
If you’ve come this far, please leave a comment below! What you think of these 7 ways that can make your house flipping project an epic fail? What did I miss? Agree? Disagree? Please leave a comment, I’d love to know what you think!