Common Pitfalls in Real Estate Flipping and How to Avoid Them
The potential financial windfall of real estate flipping is difficult to ignore, but the truth is that it takes a lot of hard work and experience to be successful.
Making money is never ensured and losing money is always a very real possibility. There are a lot of ways a flip can go wrong. Bradley Ransome explains below how investors can do their very best to avoid real estate flipping’s most common pitfalls.
When a Flip May Be a Flop
For beginners, the excitement of real estate flipping makes it easy to overlook essential preparation. One is coming up with a comprehensive and honest budget of expected expenses.
Underestimating costs is a major issue in house flipping and it can destroy the prospect of both small and large profits. Flips can stall at any time when unexpected expenses come into play. This includes everything from permit fees to the costs of repairs that were not anticipated. A house flipping budget should include everything that will be an expense, whether it’s $100 or $10,000.
Other major pitfalls of real estate flipping include:
Spending Too Much on a Property
This is a no-brainer, but not as easy as it seems. It’s easy for flippers to overpay for a property when they are excited to get in the business, need money relatively fast, or think they’re getting a great deal. The reality is that a low price doesn’t necessarily mean it’s a good deal for flippers.
The local market may be very cool, it may not be the right time to sell, or a home just may have far too many high-ticket needs to justify even a comparatively low asking price.
Not Researching in Advance
Jumping headfirst into real estate flipping without doing enough research is never a good idea. Before investing and especially before doing any type of work, flippers should take a deep dive into the local real estate market to see if demand is there for the intended property.
Flippers should look at comparable properties and also interview several contractor options (and ask them for references) to find the most reliable flip team.
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