1. Money is made at the buy, not the sell.
When flipping a house your money is made at the purchase and not at the sell of the house. A common mistake of novice investors is paying too much for a house with the intensions of making a huge profit only to find out that they could not make any money after all the renovations. The purchase should be made after estimating the cost of renovations, carrying cost, and contingency for unexpected repairs.
2. Get a home inspection.
Get a complete inspection done on your property by a certified inspector. Spending a few hundred dollars on this expense can save thousands in problems that you cannot see – including major mechanical (plumbing, electrical, HVAC), foundation, termites, wood rot, etc. The inspection can help estimate the cost of repairs. In Texas, this should be done within the option period for the contract so that you can cancel without penalty (minus the option fee).
3. Don’t do the work yourself.
Another common mistake of novice investors is that they can save money by doing the work themselves. Time is money, so get a contractor, or several sub-contractors, and have the work done quickly. The key to flipping is to act quickly so that you can get the repairs done, put the house on the market and get it sold.
“When I started flipping my brother and I did a house together”, said one house flipper, “and we did all the construction. I had a construction background and figured it would save thousands, but it took us over 4 months to get the work done that a contractor could have had the work done in a month. But, we trying to save money on our flip did all the work on our time off and after work, and it just took to long. On our next flip we used contractors for almost everything and had the house completely flipped with a new roof, new air conditioning, new hardwood, and much more in only 3 weeks. We did not have to spend all our time working on the property and were able to spend that time looking for the next deal.“
4. List the property below market value.
This may seem counterintuitive, but the object of flipping is to buy and sell the property as quickly as possible so that you can move on to the next house. If you purchase a house and try to sell it at top dollar to make an extra couple of thousand dollars on your flip, and end up holding it for 6 months you are loosing money. Price aggressively compared to the competition and you will sell it no matter what the market conditions.
5. Use a REALTOR®.
Another common mistake of the novice house flipper is to try to save money by selling the house without an agent. On the front-end a good agent can help you locate potential investment properties and provide recommendations for contractors, inspectors and lenders, if needed. A qualified professional REALTOR does more than put a sign in the yard and list the property in MLS – they can conduct a detailed market analysis (CMA) to help determine the best asking price, develop a comprehensive marketing strategy and have database of contacts to maximize the exposure of your property. A FSBO (For Sale By Owner) relies on people driving by your house and seeing the sign. With a real estate agent you have some one actively marketing your house to get it sold. Once again this will free up more time for you to look for more great deals.
The most important thing to remember – do your homework before attempting to flip a property to make sure that you can pull a profit on your deal.
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