Flipping houses looks like such an easy way to make money. All you have to do is choose a property that needs a little work and that is priced under the usual market value, buy it, do the required work (and perhaps a little more if need be and if your budget allows), then sell that property on for more than the cost of the original purchase price plus the money you spent on renovating. The profit you make is yours to keep. You can then use that profit to buy another house and repeat the process.
Surely flipping houses canâ€™t be that simple? Although the premise is a simple one, the practice of flipping houses is anything but. There are so many elements to consider and there are many mistakes that can easily be made that will derail the entire project, potentially leaving you with a loss instead of a profit.
Before flipping a house, it's important to avoid mistakes such as not conducting a thorough property search @ eXp Realty, you can access a wide range of properties to choose from, making it easier to find the perfect property to flip.
However, if you know what those mistakes are, they will be easier to avoid. Thatâ€™s why, if you want to flip houses, you need to do as much research as possible. In that way, youâ€™ll have all the knowledge and tools you need to be successful. Of course, the property market is ever-changing, and even having that knowledge is no guarantee that things will go your way. Yet despite this, flipping houses is still something that a lot of people want to do, and if you are one of them, starting the research right now is a great idea. With that in mind, read on to discover some of the mistakes you should be aware of when flipping a house so you can avoid them as far as possible (or at least mitigate them if you canâ€™t avoid them).
You Donâ€™t Have Enough Money
You can have as many plans and ideas as you want to, but if you donâ€™t have the money to see them through, itâ€™s going to be a challenge to get started, to say the least. There are some businesses you can start with no money â€“ or very little â€“ but in property, that is not usually the case. After all, in order to flip a house, you need to buy it first, and that means youâ€™ll need to have money for a down payment and youâ€™ll need to be able to afford the mortgage while you carry out the renovations. Youâ€™ll also have to have money put aside in case it takes longer than you anticipated to sell the house once itâ€™s ready (or longer to do the work to start with).
As you can see, unless you already have a decent amount of money, flipping houses is not going to be easy, and if you try to make a start without funding in place, you might find that you run out of cash before the project is completed. This would mean selling an unfinished house, and you could lose even more money as a result.
Not having the funds to hand right now doesnâ€™t mean you canâ€™t get started in flipping properties, however. You can speak to specialist lenders who will be able to give you advice about a variety of different projects, including bridge loans. A bridge loan is a type of short-term lending that is often used in the property business. You can use a bridge loan to pay for the down payment on a property, for example, on the assumption that youâ€™ll be able to pay that loan back very soon (usually within three years, although often much less than this) because youâ€™re selling the property. If you donâ€™t have the money yourself, this can be an ideal way to finance your initial purchase.
Youâ€™ll also need to have the money in place to pay for the renovations themselves, as, unless the property market is particularly buoyant, you canâ€™t just buy a house, wait a couple of months, and then sell it for a profit. If you donâ€™t have the money for renovations or you have a small budget that would mean those renovations wouldnâ€™t be good quality, itâ€™s probably best to wait until a time when you do have the funds.
You Donâ€™t Have Enough Time
The truth is that when you buy a house to flip, you need a lot of time to devote to it. Some people assume they can take this kind of thing on as a side hustle while they are working full time, and that it would be a fun project that can make them money. However, if you are serious about making money, you need to be meticulous when it comes to the quality of the work done, so it might not be something that can be done only during the weekends and evenings, for example â€“ especially if you need to sell the property quickly before you spend too much paying back the mortgage.
One way to get past this issue is to hire professionals to do the work for you. Youâ€™ll still need to be a project manager for the job and check in on a regular basis, and youâ€™ll need to be available to answer questions and make decisions, but the day-to-day work would be someone elseâ€™s responsibility. What makes this an even better idea is that the professionals you hire will be experts, so theyâ€™ll be able to do the work more quickly than you could and to a higher standard.
The issue with this is that it is going to eat into your budget. It might be that hiring people to carry out this work is not cost-effective if the profit margin is already slim. This is why you need to work out your figures before you make any commitments to buying a property. Your budget should include this expert help if possible, and if the house you intend to buy is not going to give you enough profit once all the work has been done and the fees paid, look for something else. The other option is to dedicate all your time to DIY, but not everyone will be able to do that.
You Havenâ€™t Checked Out Any Auctions
Buying the right property for your flipping project is the first challenge, and everything else you do rests on that. So it is certainly a good idea to spend your time focusing on creating a must-have list for whatever it is youâ€™re going to buy. Perhaps you know that people want a driveway or a backyard in the area youâ€™re buying. Or maybe you know that youâ€™re going to put in a brand-new kitchen and bathroom no matter what the property is like. Make a list of everything youâ€™re looking for and a list of everything youâ€™re willing to compromise on (this should be a shorter list â€“ after all, youâ€™re not living in the property, so it should be a purely objective list). Once you know what you want, you can narrow down your search and save a lot of time only focusing on properties that fit the bill.
However, if you only do that by looking through online property sites or signing up with real estate agents to receive alerts when something you might want to buy comes on the market, you are missing out on something that could really help you. Remember, everyone else looking for property is going to be doing the same as you, so youâ€™ll have to get ahead of them and that might mean you pay more for a property than you expected to if itâ€™s one that a lot of people are interested in. This can decimate your profit.
This is why auctions are such a good idea for those who want to flip properties. The standard house buyer â€“ the person who wants to buy a house to live in â€“ is not usually going to look at auctions because the houses on sale at auctions tend to need a lot of work; this is why they are in an auction in the first place, because a real estate agent would have difficulty selling them.
As someone who is ready to do a lot of work on a property anyway, and actually has the expertise needed to do that, it could be that an auction will get you exactly what you want at the right price.
Before you buy anything, go to a local auction and see how it works. You can talk to the experts to get advice and watch how other property buyers use the auction to their benefit. Youâ€™ll also be able to get a better idea of the types of property that will be for sale using this method, and what condition they are in. You can then determine whether you would be happy to take on such a project.
Flipping a property can be a great way to make money, but itâ€™s not as easy as it seems on the many TV shows that show you how itâ€™s done. In fact, there are lots of hidden issues and costs that can make it very challenging indeed. However, if you research well, know your limits, have the money, and have the patience, itâ€™s certainly something you can enjoy. Property investment companies like rw-invest.com can offer further clarity into the buy-to-sell house flipping process.