Since the early 2000s, house flipping has become one of America’s most popular trades. While many flippers are having great success, others have failed in the marketplace due to critical factors they’ve overlooked. No amount of insider insights and information can outweigh these five profit-killing mistakes fix-and-flip investors often make.
Not enough money
Researching all of your financing options and making sure the sale price will cover the cost of acquisition, interest, taxes and renovations, as well as the cost of utilities, is crucial to overcoming the financial hurdles. People too often fall in love with a piece of property at what seems like a great price, but there are many factors that can slow down the renovation and sales process, increasing your holding costs and turning what looked like a profitable venture into an unprofitable one.
Not enough time
Finding the right house is a process that takes time. And, we aren’t just referring to searching for the right property, we’re including all the time it takes for the renovations, inspections and full compliance checks necessary to consummate the ultimate sale. If you don’t schedule all of these events upfront, and stick to that schedule, putting the house back on the market might happen much later than you expected (see “Not enough money” above.)
Not enough skills
What does it take to flip a house? Being handy with drywall or a toolbox is not the only experience needed to be a successful flipper. Many flippers are also full-time contractors, but if you aren’t, find experienced and licensed professionals for your general contracting and sub-contracting needs. Common “team members” include electricians, plumbers, roofers, pavers, and more. You don’t need to go it alone, and in many case you shouldn’t. One misstep could erase all of your anticipated profits.
Not enough knowledge
In order to pick the right property, it might help to possess, or bring in, expertise and local knowledge about tax laws, housing market trends, and the skills needed for renovations. These “knowledge skills” can be just as important to a profitable fix-and-flip as the hard skills mentioned above.
Not enough patience
It’s all too common for rookies to throw cash at any problem that arises, or to “speed things up.” Carefully consider which problems need fixing and which ones don’t. Some fixes are must have, but many are simply nice to have. Don’t let the perfect get in the way of the good. Your goal is to make a property better, not perfect, to make the sale and earn the rewards. As for speeding things up, if you planned out your schedule as we recommend above, any impatience should melt away.