Although flipping homes stands to make you quite a bit of money, this shouldn’t be taken to mean that success is guaranteed with every flip. In fact, jumping into your first house flip without brushing up on the tenets of successful flippers is liable to end in immense frustration and financial strain. So, if you’ll soon be undertaking your first flip, it’s important to understand some of the most common reasons for which flips go south.
Overpaying for Homes
As is the case with any type of real estate investment, you should take measures to avoid overpaying for potential flips. Regardless of how flawlessly a flip meshes with your personal sensibilities, it’s imperative that you do your homework before putting down a serious offer.
For starters, this entails researching the home’s location. How large is the area’s population? What’s the median income? How much demand for housing is there? How robust are local property values? The answers to all these questions will serve to give you a solid understanding of a prospective flip’s true value. Additionally, take a look at what similar homes are selling for in the area, and should you find that the one you’re interested in is considerably more expensive, request that the seller adjust their asking price accordingly. (At the very least, you should request an explanation as to why they believe their home is worth more than similar local properties.) Failure to do proper research is liable to result in you paying far more than a flip is truly worth and being unable to make a profit with the finished product. So, when considering how much can you make flipping houses, never forget the importance of thorough location research.
Refusing to Have Homes Inspected
There are numerous reasons every flip you invest in should undergo a pre-purchase inspection. To start with, a meticulous inspection from a certified professional will ensure that you’re made aware of any outstanding issues with the property before committing to purchase. When it comes to investments of this size, it’s helpful to know exactly what you’re getting. Additionally, depending on the scale of the problems an inspection uncovers, you may ultimately determine that a prospective flip is unworthy of your time or capital.
Professional inspections can also help you on the budget front. For example, if a home has far more problems than you were initially led to believe, you’ll be in a good position to request a significant reduction in asking price. Furthermore, the results of an inspection can play a key role in determining your construction budget. Once you’ve received the results, take note of any repairs or renovations the inspector has deemed necessary and obtain estimates from various contractors, as this will give you an idea of how much this project is likely to cost.
In the absence of a pre-purchase inspection, you may wind up overpaying for a problem-laden home and find yourself unable to recoup the resulting repair/renovation costs when selling the property. Additionally, if you dive into a project of this nature without a clear understanding of how much work needs to be done and how much this work is likely to cost, you may exhaust your budget very early on in the flipping process.
Hiring Unlicensed Contractors
While working with unlicensed contractors may strike you as a smart way to save money, this is a decision that’s liable to prove more costly than convenient. Unlike their licensed contemporaries, unlicensed contractors have virtually no incentive to guarantee the work they do, conduct themselves in a courteous manner or stick with jobs until they’re completed. Furthermore, if an unlicensed contractor injures themselves while working for you, you may be responsible for paying the resultant medical bills.
As many first-time flippers come to discover, there are a variety of reasons for which house flips go awry. While there’s no denying that undertaking one’s first flip can prove challenging, educating yourself on the tenets of a successful flip can make the entire process considerably less harrowing. So, instead of diving into your very first flip without the proper knowledge, take some time to brush up on the ins and outs of house flipping. As you’re likely to find, a solid understanding of the most common reasons for which flips go south can be a boon to your efforts.
