It’s common to read information online about house flipping and think that it’s a fun investment opportunity to try out. However, there are several major mistakes that new house flippers often make that can cost them quite a bit of money. If you’re interested in breaking into house flipping, using private money lenders to finance your house rehabs, it’s essential to avoid these mistakes.
Over Paying For The Property
One of the most important factors in the flip process is the purchase price and how much you pay for your flip. It is critical to the success of your flip that you do not overpay for the property and buy it at a price that will guarantee that you will make the desired profit at the end of your project. If you are not buying the property at a price that you are comfortable with, pass on the deal. Wait to buy a flip that gives you a generous profit.
Failing to Plan Your Finances
Before you break into house flipping, you should know where your money is coming from and where it’s going. Otherwise, you could find that you don’t have enough money to complete your project. You’ll need to make sure to have a thorough plan with your private money lenders about what you estimate the rehab to cost from start to finish, as well as the price for which you expect the house to sell. Knowing this information will help make sure everyone gets what they want out of the flip.
Stick To Your Repairs Budget
When you establish repairs, you must discipline yourself to stick to that budget. Before you buy the property, come up with a repairs budget for labor and materials to remodel the entire property. If this number is $50,000, it is very important that you do not go over this budget. Every dollar you put into the project is a dollar you may not receive. Don’t over-improve the property, and repair it to your personal tastes. Repair it to the standards of homes in your local market. Look at other flips and see how they are rehabbing their properties. You should focus on the basic improvements that the property needs to make it functional and valuable on the housing market. Each improvement you make is money that you’re investing and money that will take time to get back, so don’t make the mistake of improving the property too much.
Failing to Resell The Property For Your Projected Selling Price
One way your flip can fail is by falling short of your projected resale price and selling for less. Before you purchase your flip, make sure that you are confident about the resale sales price of your property. It’s good to sell for more than your projected resale price, but selling for less can lead to failure and frustration and even potential loss. To establish an accurate projected resale price, make sure you drive the neighborhoods within .5 mile of your flip property and look at all closed sales, pending, under contract and active listing for similar properties. If you have to involve a Realtor who knows that are to help you, hire he or she to resell the home to ensure it sells for the price you are aiming for. You must understand why your property should sell for the projected resale price. Never accept anyone else’s opinion unless you completely agree with the projected resale price. The resale price is a very important factor in the success of your flip, make sure you are confident with this number.
Jay Green, President of GW Private Capital, Inc. has flipped more than 100 properties and has made money and lost money flipping homes. To learn more about how to successfully flip Southern California properties, call, text or email him 714-747-1912 / jay@jaywgreen.com.
