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Here are some common mistakes to avoid

There is no doubt that when you turn on HGTV, A&E or any of the other channels that follow “flippers” they make it look so easy. Investors of all levels from first timers to seasoned vets buy run-down houses, fix them up and sell them for huge profits. The term flipping has been coined for this process and make no mistake about it… many millionaires were created doing this especially during the recently passed real estate boom.  So yes it can be lucrative and contrary to many stories out there now it is still lucrative WHEN DONE CORRECTLY! Go in blind and hopefully the only thing you lose is the shirt on your back.

We sat down with several other seasoned “flippers” and came up with some of the most common mistakes made by novice investors and decided to share that list with you in hopes that you are able to avoid them on your flipping endeavors.

Not knowing enough about the market:  The biggest mistake made… not understanding where you are buying; if you don’t know about the comparable homes in the neighborhood and what they sold for you cannot make an educated decision on whether the investment property you are considering buying is a solid deal. If you don’t buy at the right price you have a much harder time making a decent profit.  Another important detail many investors over look when accessing the neighborhood is the days on market. How long are properties taking to sell? Until it sells it’s your expense and each day lessens your profit.

Over-improving the property:   Yes, there is little debate that if you update the kitchen and bathrooms you are generally going to increase value. However you can quickly get in over your head especially when you start making structural changes to the property or putting upgrades that do not fit the neighborhood demographics.  Typically paint, new carpet and cosmetic updates to the kitchen and bathrooms may be all you need to make a profit. Keep in mind if you improve your flip to the most expensive home in the neighborhood you may have a problem selling it.

Decorating to your tastes instead of buyer’s tastes:  I love bold colors and contemporary decorating but the safest choices to make when trying to appeal to mass amounts of buyers is to stay neutral. One our first flip I remember spending much money on little “designer” touches that; while they looked good they did not add to our bottom line profit, in actuality they took away from it. Needless to say they were left out of every flip after that one.

Under-Budgeting:  Golden Rule… Over estimate the cost on everything! It’s better to come in high and have money left over from your repair budget than to come in low and searching for additional money. Oh yeah and by the way when you under estimate you also give yourself a “false” profit, be upfront with yourself and when you come in under your budget you’ll have a bonus to your end profit! By the way while we are talking about budget here, do not forget to spend some of your budget on curb appeal. I cannot stress to you how big curb appeal is. If the inside is beautiful but the outside still looks like the Sahara desert you not going to get folks in the front door!

Indecision aka no exit strategy:  Here is a cold harsh fact… If you don’t know what you want to do with a property as soon as you close your deal, or you dare go into it without having contractors already lined up, you are wasting your time!, and with flipping…TIME IS MONEY.

Tags: buying real estate, Investing in real estate, Real Estate