House flipping has become popular in the real estate industry that there are entire TV shows devoted to it. The shows make it seem so easy that anyone can do it.
The concept is simple: You buy a house that is falling apart and needs work and you repair it. Since the property needs so many repairs the price for the house is usually lowered drastically. If everything goes as planned you will end up with a nice profit at the end.
But there’s a catch when it comes to flipping houses, things can go wrong, fast. Here are four house-flipping mistakes by Property Records Inc that you should avoid because they will drain your funds:
- Not having enough money
- Not having a clear business plan
- Not having the right or any property insurance
- Overpricing the property
Not Having Enough Money
Not having enough money to repair a fixer-upper is one of the top mistakes flippers make. Before making money you have to spend money but unfortunately, flippers will spend more in purchasing and closing the deal that there isn’t enough to for the repairs and going for the cheaper materials isn’t always a good idea, just like the old saying goes, “you have to spend money to make money.”
Not Having A Clear Business Plan
Not making it clear of what you want to do with the property and how money is going to be spent is a recipe for disaster. Flipping properties isn’t just about making money it’s about having knowledge of how, when and why.
If any of these plans fail you will end up losing money. This is why it’s so crucial to know your budget and how much it will cost to repair what needs to get repaired.
A clear business plan should include:
- A budget of how much will be spent
- A list of what needs to be repaired or replaced
- A schedule of when repairs have to get done by
Not Having the Right or Any Property Insurance
If you plan on risking your new property don’t get property insurance. Property insurance isn’t just for homeowners, it’s also for property flippers and it protects them against fire, flood, earthquakes and other materials lost to theft.
The last thing you want to happen right after purchasing your fixer-upper is for a fire to start and the entire property goes up in flames. Natural disasters are also a big problem since homes will be left vacant for many days unsupervised.
Over Pricing the Property
The last step, after all, is done is pricing the property. Yes, the goal of a fixer-upper is to make money but over-pricing the house will do the opposite. Not only will it scare off potential buyers it will also be left vacant and you will be spending money every month.
Take a look at surrounding properties and see how much they were sold so you can have an idea of how much to price tag the house.
House flipping is how many people are making a lot of money from but it has to be done right and planned ahead of time.