While many house flips go off without a hitch, success is never a guarantee when flipping a home. The less experienced you are, the more likely things are going to go south. As such, there’s little wonder as to why so many people’s first flip is also their last. To help ensure that your freshman flip doesn’t hit a snag,
Take care to brush up on some of the most common challenges faced by fledgling flippers.
You Didn’t Research the Home’s Location
It’s impossible to overstate how large a role location plays in a home’s profitability. It should come as no surprise that a home found in an area with a robust population, strong local economy and immense demand for housing is likely to rake in a much healthier profit than one that’s found in an area with a declining population, weak economy and waning demand.
So, before making an offer on a potential flip, take some time to research its location. To ensure that you get the clearest possible picture of a prospective flip’s locale, do a deep dive into its population size, rental rates, home prices and median income.
This will help you determine how much demand exists within an area and whether flipping a home here is worth your time and resources. Luckily, even in areas with perpetually high demand, investors are rarely unclear on how to buy a foreclosed property.
You Abstained from Having the Home Inspected
Having a prospective flip inspected before putting down an offer is important for two reasons. To start with, a formal inspection will reveal any outstanding issues with the property, enabling you to make an informed offer – or an informed decision to walk away.
Secondly, the results of an inspection will provide you with a clear understanding of how much work a home requires. Furthermore, after obtaining contractor estimates for addressing any issues the inspection turns up, you’ll have a solid idea of how much money it will take to get the home in sellable condition.
If a seller is completely opposed to allowing an inspection to occur, this should be taken as an indication of a desire to hide certain issues. Instead of wasting any time arguing, simply make it clear that your interest in purchasing this home is entirely contingent upon the results of an inspection from a certified home inspector. Should this fail to sway the seller, walk away from the deal and shift your focus to other potential flips. A home that hasn’t been professionally inspected represents too big a risk to take with your money.
You Didn’t Budget Properly
Proper budgeting is essential to the success of any house flip. In the absence of smart budgeting, you’re liable to run out of money midway through the flipping process and have to leave the home unfinished for an indeterminant amount of time.
So, before proceeding to commence work on a flip – or making a serious offer on a home – obtain contractor estimates for addressing any issues that a professional inspection reveals. These estimates will give you a good idea of how much capital you’ll need to see a flip through to completion.
Furthermore, these estimates should help guide any offers you make for prospective flips. Prior to putting forth any offers, carefully consider the collective cost of addressing necessary repairs and/or renovations and tailor the amount you’re willing to pay for a home accordingly.
It’s also important to remember that estimates are just that – estimates. And while they may be reflective of the final cost, it’s generally safe to assume that you’ll wind up paying a little more after all the work has been completed. With this in mind, make a point of setting aside extra money to cover any unforeseen costs or emergencies that occur throughout the flipping process.
Whereas a successful house flip can net you a handsome profit, an unsuccessful flip can result in considerable financial losses and an acute case of buyer’s remorse. As such, it’s in every fledgling flipper’s best interest to approach the flipping process with caution and do their homework before proceeding to commit themselves.
There are a host of reasons for which house flips go off the rails, and by educating yourself on some of the most common ones, you can effectively prevent yourself from making costly mistakes.
Also read: Building a House Step by Step: A Guide from Start to Finish
