Flipping properties is a very profitable business if you know the tricks of the trade. This is one of the reasons why flipping real estate is glamorized on TV. However, it’s not all glamorous and it can be easy to make costly mistakes if you don’t have the proper guidance. The following are some of the most common financial traps that people fall into when flipping houses.
Working On A Deal Alone
To successfully flip real estate, it’s best to work with a team of qualified individuals. It’s difficult and risky to work and negotiate a deal by yourself. In general, you should have the help of a qualified lender, real estate agent, general contractors, and certified public accountants.
Doing The Remodeling Work Yourself
To save labor costs, you may be tempted to do the repair or remodeling work on your own. This is a costly mistake. In the long run, it will usually cost you more time and money than just hiring private contractors to do it.
Having No Exit Strategy
Entering a deal without an exit strategy is a recipe for financial disaster. You need to formulate an exit strategy so that, in the event that anything unexpected crops up, you will be prepared and know how to react in a way that doesn’t lose you money. Common exit strategies include renting the property, selling to a wholesale investor, or leasing the property.
Underestimating The Time Required
Don’t be too optimistic about the time required to flip a house. There are things that may not go as planned. Give sufficient allowances to unexpected situations where you cannot control the outcomes. Flipping a house in just six months, for example, is a very optimistic estimate. You should allow enough time for the negotiations to come through, to get the work done, to get the home listed, prepare the contract, and to close the deal. This is one of the biggest mistakes inexperienced real estate flippers make.
In the last few decades, flipping houses has become a popular way to earn money, both as supplemental income, and as a primary occupation. Unlike many sources of income, however, there’s significant risk involved in the process. An inexperienced real estate flipper stands to suffer significant losses on their investment if they make the wrong mistakes—a fact that can frequently serve as a barrier to entry for those wanting to join the industry.