Fixing and flipping properties can be a wildly successful endeavor or an incredibly frustrating one – it all depends on how the project is handled from start to finish. There are several benefits to be had from successfully flipping houses, but some investors may miss out on their ROI because of certain mistakes throughout the process that cost time, money, and energy. Continue reading to learn about the 5 most common fix and flip mistakes and how to avoid them.
What should you not do when flipping a house?
1. Overspend on the Property
Staying within your budget is crucial for any real estate investment. Overspending is one of the most common mistakes that investors make when fixing and flipping properties. Cash flow should always be top of mind when it comes to investing in property. One important question to ask yourself is: will the additional spending on certain fixtures increase the property value by more than the increased cost? If the answer is no, we recommend reconsidering the extra expenses and sticking to your budget.
2. Deviate from the Work Schedule
Likewise to money, time is also one of the most significant factors in real estate investments. Since time is an investment in and of itself, it’s important to be aware of the timeline for your fix and flip property. If too much time is wasted on specific projects and the work schedule is drawn out over a longer period of time, additional financial costs can be incurred. Opportunity costs should also be considered – the longer it takes to complete one fix and flip project means less opportunity to start new ones.
3. Work on the Fix and Flip by Yourself
Another common error made by fix and flip investors is relying solely on themselves to complete a project. Hiring qualified contractors to complete various projects on the fix and flip property will help you finish the process faster and more safely, as well as save you the time and money involved with obtaining your own contractor’s license. It’s important to remember that any type of real estate investment requires a team of qualified professionals with diverse skill sets.
4. Purchase without Sales Comps Research
Although it’s tempting to purchase a property priced at what seems like a bargain, take a step back and give yourself time to research the price. We recommend gathering ample data and neighboring sales comps to determine a reasonable selling price before committing to purchasing a property. This knowledge will allow you to set the construction budget and estimate the expected profitability from the fix and flip.
5. Neglect Establishing an Exit Strategy
The completion process of a fix and flip project is just as important as the starting process. Having an exit strategy plan before purchasing property is essential, as the correct strategy will ensure maximum profits and minimal risks on your investment. Common real estate exit strategies include selling the property, leasing the property, or seller financing.
[ READ MORE: What is the 70% Rule in House Flipping & Why Does it Matter? ]
It’s important to be aware of these common fix and flip mistakes so you can avoid them and get the most out of your property investments. Our team here at Loan Ranger Capital works closely with many fix and flip investors across Texas and Tennessee. Reach out with any questions on your next property investment and we’ll be happy to help!