House Flipping is a type of real estate investment strategy where the investor purchases a property to sell it and make profits. The profit is extracted from the price appreciation in the hot real estate market where the prices increase faster or from the capital investment made in the property.
Investors involved in house flipping always focus on purchasing and resale of the property. Investors are successfully making a steady flow of income with frequent house flipping.
So, how do you flip a property or house? In general, flipping is the process of buying a property in less and selling it at a higher price.
Rather than adopting the buy and hold strategy, the investors attempt to complete the transaction faster to limit the amount of risk on their capital. The focus is always on accelerating the transaction rather than maximum profit.
It is because each day passes, it costs more money to the investors. It is just the general plan of flipping, but many other pitfalls need to be avoided during house flipping.
Common House Flipping Mistakes
1# Do-It-Yourself
DIY projects are fun-filled as it offers you a sense of accomplishment, but when it comes to house flipping, the rehabilitation job must be entrusted to experts in the field.
It would be best to keep in mind that the property you are renovating is not yours, and you will not be living there. So, it is better to calculate the rehab cost and hire a contractor for the rehab task.
The cost of hiring a good contractor would be less than the expenses of repairing the errors yourself. If you make any classic mistake during the process, it would cost you more.
2# Underestimating the Time and Budget
House flipping is a long procedure, and you need to have patience and give sufficient time for it as Sydney Property Valuers notes. From buying the right property to calculating the scope of work and listing it for sale, many things are associated with the process.
So, it is always smart to overestimate the rehab cost and deadlines rather than underestimating them. Logic and reality are two different things in the rehabbing. If your contractor says the process would take three days to carpet the living area, it may sound right, but it would take one week in reality.
You may have calculated and estimated the cost of rehab, but you see additional costs when the process starts. So, it is good to double the timeline and estimated costs.
3# Make it Look Good for the Neighborhood
Amenities like costly chandelier or expensive granite countertop make good additions to any home, but they are not always worth it for your specific bottom line. Professionals often get too attached to the properties, and it happens to many people.
Remember, house flipping is the strategy that is opted for one reason: making a higher profit out of it. It would be best if you inspect the Neighborhood thoroughly before investing.
If your property looks good in the block after the rehab, it will surely emerge like the soaring thumb. But it doesn’t mean that you have to keep the place a dump. It means you have to look for the comps in and around the area.
4# No Backup Plan
It is a common mistake during the house flipping and must be avoided. It would be best to have a plan B or an exit strategy for situations when the rehab doesn’t work as expected. The best strategy is if you can’t flip the property, rent it out.
The primary goal of any flipping process is to sell it at a higher value than the price you bought. However, the home appreciation rates are getting slower, and it is not always possible to flipping successfully.
So, the great alternative is to rent the property until you are getting the desired asking rates. It helps you keep the property occupied, and you will also develop long term wealth and passive income to pay off the mortgage every month.
The only efficient way to become successful real estate investors is by learning to see the value of failures. Many people believe that there is no such thing as failure, but in regards to house flipping, it is the statement that is true.
Resources:
- 5 Ways Of Accurate Valuation Every Valuer Should Know
- The Ultimate 5 Question Guide On Property Valuation
- 10 Steps to Ace Commercial Property Investment
Author: Priyank Soni
