House flipping is a lucrative thing to do provided that you know how to get things done. It is not something that is for everyone to venture into. There is a lot of nitty-gritty that needs to be covered to succeed.
Most unsuccessful house flippers think that all you need is to purchase a property, work on some improvements, and put it back on the market. Some even think that they can just flip houses for 1031 exchange properties. Unfortunately, it doesn’t work that way.
If you’re seriously considering getting into the house flipping business, here are some of the things you should avoid:
5 Things that Will Make House Flipping a Flop for You
1. Not having enough money to complete the project.
Most investors fail in this business due to a lack of money. It takes money to make money. In a sense, it takes a lot of money to make a lot of money. You must understand that dabbling in this business can be costly. You need to have more than enough money to acquire a property and the improvement project required to make the house as profitable as possible.
If you do not have enough cash to go around, look for other financing options. Ideally, you get the best possible deal with as minimal interest rates as possible. After all, your goal is to make as much money as you can.
2. Not writing down a solid business plan.
When we say writing down a business plan, it goes beyond the typical research-budget-execute scheme. We’re talking about more in-depth and highly strategic planning that involves understanding the risks, rewards, and the ROI of the project.
Writing down a solid business plan helps you keep track of your progress and your timeline. You have to keep in mind that the longer your project takes, the more costly it is. The sooner you get everything executed according to plans, the quicker you get your property listed.
3. Not getting property insurance.
Protect your investment. Get property insurance to cover you from certain risks that could happen within the course of the project. Not getting one is a grave rookie mistake that you will regret when things go south. Property insurance shields you and your investments by reimbursing you from any potential damage caused by fires, floods, and theft, among many other factors.
4. Not having the right partners for the project.
Like any other huge endeavor, the success of your project will depend on the people you surround yourself with. The entire process of house flipping is already stressful enough as it is. Having the wrong people on board as partners can amplify the stress and give you a lot of headaches and unwanted issues to deal with.
On the flip side, getting the right people involved makes the job easier and more professional. Working with experts in this field gives you peace of mind that, despite the typical challenges the industry brings, you will succeed.
5. Not having an exit strategy.
The price at which you decide to sell your property matters. You cannot afford to underprice it since the goal is to make a profit off it. On the other hand, overpricing it will put it at risk of being on the list for a long time with no interested buyers. Talk to your realtor about fair market values in your area. Knowing how to properly price your property will help get it off the market at the soonest possible time.
Take your time and don’t rush things. Never cut corners. Good things don’t come overnight. Flipping houses can be very stressful but if you do things right and are patient enough, you will surely reap the rewards of all your hard work.