5 of the Worst Mistakes That First Time House Flippers Make
Flipping houses has become something of a modern method of trying to gain wealth using nothing but your own skill and resources. The idea is relatively simple, but so many people make mistakes when they first try to enter the flipping fray.
In fact, many people tend to make mistakes because they assume the process to be easier than it actually is, and that causes hiccups along the way. If you are interested in flipping houses for a profit, it is certainly possible with the right preparation and research. But without such preparedness, you could easily experience an issue that cuts heavily into your profits.
Below are just a few of the most common ways people make mistakes when they try to flip houses.
- Insufficient Time
Flipping houses isn’t really something that can be done on the side or part time, at least not without a tremendous amount of free capital to work with, but at that point flipping would be more of a hobby than a means to make more money. If you have another job that takes a good chunk of your days, you won’t have the time to devote to researching, acquiring, repairing, and selling properties.
In order to maximize your potential income through house-flipping, you must devote yourself fully to the cause. Flipping houses should be considered a full-time job, because it requires that level of attention to be successful.
- Lack of Skills
The unfortunate truth with flipping houses is that not everyone has the necessary skills required to make many of the major repairs that a house might need. If you think that flipping houses is nothing more than buying a house, throwing a coat of paint on the outside, and cleaning up the property, you’ve got another thing coming.
House-flipping is profitable because flippers buy run-down or decrepit property at a drastically reduced cost, which means just about any property you buy to flip is going to need much more work than the average person can do. When you have to hire plumbers, electricians, or other professionals to come make those repairs, you are only cutting into your own profits.
- Forgetting Patience
Flipping houses is no overnight solution to a high level of income. The time devotion is such an important one because houses often take months to sell, if not longer, and that is only after all the repairs have been made, which could take additional months.
Flippers might spend more than 6 months of their time focusing solely on one house, and it is possible they could invest more in the house than they should in order to sell it faster. This could cause financial problems if the house doesn’t sell since that debt has be paid off somehow. Keeping the long game in mind is vital so house-flippers won’t dig themselves into a hole they can never escape.
Getting a loan to help repair and flip a house is a much different process than securing a loan for a house in which you plan to live for many years. Most banks won’t make special provisions for their housing loans even if they know the money is going to be used to flip a house.
However, hard money loans exist specifically for those who want to fix and flip a house. These loans are designed for short-term use and are much more cost-effective for those hoping to profit from flipping a house than the average person realizes.
- Real-Estate Knowledge
Anyone can go into an unfamiliar neighborhood and pick out a home for sale that might need some work, and those are the homes that house-flippers will be drawn toward. However, just because a home looks like it could be flipped doesn’t mean that it could be. The home might be dilapidated for a reason.
Perhaps the home is in an unruly part of town, and therefore no one could afford to fix it, much less buy it from someone else who already repaired it. Real-estate research is required by house-flippers in order to prevent buying homes that can’t be resold, but many newcomers completely disregard this tenant and merely search for the cheapest homes that are the easiest to fix.