Definition of House Flipping: “Quick-profit strategy in which an investor purchases real estate at a discount price and improves the property in order to sell it at a higher price.” http://www.businessdictionary.com/definition/flipping-houses.html
Wow, that sounds easy, and if you tune in to one of multiple House Flipping shows, it looks easy as well. However, as the old saying goes, if something looks too good to be true, it probably is and this is certainly true with House Flipping. Can it be done successfully, YES, is it easy, NO.
So what are some of the most common challenges to House Flipping? I’ve summarized some of the most prevalent below:
Choose your partners carefully! According to Business Insider, if you are partnering with someone else make sure you lay out what each is contributing up front, equivalent “skin in the game” is very important and likened to being in a lifeboat together.
Don’t overestimate your rehabbing skills! Fortune Builders article titled “Simple Tips for Avoiding the Most Common Flipping Mistakes” cautions that thinking you can do the entire project your self is rarely successful, while some people have trouble delegating, this is a great time to learn!
Choose your contractors carefully! Investfourmore’s article titled “What are the Top 10 Mistakes New House Flippers Make?” says to be aware of both the availability and timing of contractors, unless you are planning to do every part of the renovation yourself you will be depending on the availability, timing and cost of contractors as part of your project.
Don’t Underestimate Time! Eyes on the Dollar’s article “9 Mistakes I’ve Made Flipping Houses” cautions that one of the most common mistakes first-time flippers make is estimating renovation time. Availability of materials, contractors, and your personal management skills will affect your success and unless this is your “full time job” don’t forget that all of this has to be incorporated with your homelife.
Don’t Underestimate Costs! In Realtor.com’s article “6 Costly Mistakes First-Time House Flippers Make”, it is pointed out the Total Costs of the project include not only Renovation costs but property taxes and home owners insurance from the time of purchase to the time of sale. Other costs include closing costs when the house is sold and federal and state income taxes on your profit to name a few.
Still want to give it a try? If you are prepared to handle the challenges above and:
- Have your Lender or Financing secured
- Contacted your Home Insurance Provider for a quote
- Identified what work you will do and what work you will hire out
- Have your contractors lined up
- Identified your available time
- Created a budget
You are off to a great start.
Don’t forget the importance of contacting a REALTOR to assist with the purchase and sale of your property. REALTOR’s can offer assistance in the purchase and sale of your Flipped Home, identify closing costs that your will incur at purchase and sale, provide a Market Analysis for pricing strategies, a marketing plan to sell your property quickly and negotiate on your behalf.
Still planning to Flip a House! I look forward to speaking with you to see how I can help!