7 Major Fix and Flip Mistakes to Avoid
Flipping a real estate property can be a great investment opportunity when done correctly. “Fix and flip” refers to when an investor buys an older property in the hopes of doing enough renovations and repairs to sell it at a profit. With proper planning and the right amount of investment capital, one could easily make a lot of money from fix and flip investments. There are, however, many mistakes that can be made along the way if you aren’t careful.
It’s important to be aware of common fix and flip mistakes, especially if you’re a first-time investor. Some of these mistakes might include spending too much money on the property itself or investing without an exit strategy. Read on to learn about these and other common fix and flip mistakes that should be avoided at all costs.
But first, if you would like to learn how to properly finance a fix and flip today, simply click the link below for a free strategy call with our team at LendCity.
Always make a plan for real estate fix and flips
Before investing in a fix and flip property, it’s best to have a strategy in place. The first thing you’ll probably want to do is decide on a budget. This will help you from spending too much on the initial property. It’s then important to do proper research on any property that you’re considering. Have a real estate professional inspect the property with you. This is one of the best ways to estimate how much repairs and renovations might cost.
Your plan should also include a timeline for repairs and when the property will be ready for market. A good timeline will allow you to properly budget and prepare for any mishaps that may occur during the process.
Going in without proper financing
Home rehab can take a lot of money, especially if you purchased an older property. Depending on the property you buy, there may be a lot of renovations and repairs needed. You’ll want to have enough money to pay for a good piece of property without having to spend everything. This is why it’s important to have a good budget in place. It’s also usually a good idea to take care of any debt you have before investing in property.
Spending too much on the house
Don’t fall in love with a property and end up spending more than your budget allows. It’s important to not spend every dime on the property itself as you’ll still need funding for repairs and renovations. Decide how much you’re willing to spend before looking for a property, then stick to this budget no matter what.
There are also plenty of unexpected costs that may come up after buying a property. Even if you’ve prepared for certain repairs, you might stumble across a few more. Renovations could also cost a lot if there are many visual improvements needed before putting the house back on the market. You don’t want to find yourself without enough money to finish all the needed repairs and renovations.
You can’t be sure how long your property will take to resell after completing renovations and repairs. It’s good to have some extra money saved as a buffer if your property is taking longer than expected to sell.
Discover How To Fix and Flip A House With This Step By Step Guide
Not spending enough on the house
It’s also important to make sure your investment is worthwhile. This means not investing in a home that needs plenty of repairs, just because it’s cheaper. Buying a cheaper property can be quite tempting, especially to new investors, but low-priced homes often come with many problems that are expensive to fix. You’re better off spending more money on a worthwhile property than buying one that’ll take a lot of time and money to prepare for the market.
Going in without an exit strategy
Investments are risky. That’s why it’s important to always have a backup plan, no matter how good things are looking. Even if everything goes according to plan at first, there are always more things that could go wrong. This might include the need for more repairs than initially anticipated or the home not selling after a long time on the market. For these cases, you might consider having another investor lined up.
Turning the property into a rental could also help you make back some money if need be. While you may not make as much as you were hoping, having renters could assure you that some income would be coming to you every month.
Discuss your plan with a real estate professional and have them help you develop a good exit strategy. It never hurts to be prepared for anything and everything!
Doing too much
It’s easy to go overboard when renovating a home. You can get so lost in making a property look good that you forget to stick to your budget. While it’s important that your property looks tip-top for the market, you shouldn’t be spending all your money on renovations, especially when they aren’t strictly necessary.
Many people will try and upsell you when it comes to certain things, like flooring and appliances. In most cases, though, there are cheaper options that look just as good. Do plenty of research on any materials that are needed for your renovations and see if there are cheaper options available. A reliable local contractor can usually point you in the right direction of said materials.
Trying to do everything on your own
You’ll need professional help when it comes to repairs and renovations. Even if you’re experienced in some types of home repairs, preparing an entire property for resell is a big job for one person. Set aside some money in your budget to pay repairmen, plumbers, electricians and any other professionals that may be needed.
It’s also important to have a good real estate agent on your side. This agent can help you with everything from finding a property to planning your budget. Real estate professionals have plenty of knowledge about the local market and which neighbourhoods are currently popular. They are also usually experienced when it comes to the costs of repairs and renovations.
If you’re thinking about buying and renovating a home for resell, then make sure you’re properly prepared. A fix and flip can be a great investment—when done correctly.
Once again, if you would like to learn how to secure fix and flip lending for your fix and flip deals, simply click the link below for a free strategy call with our team at LendCity.