When it comes to making money in the business of flipping houses and other real estate investments you will find all kinds of do’s and don’ts along the way. The truth of the matter is that these are extremely useful whether this is your first house flip or you have been flipping houses for years. In fact, you might just find that you can learn something new on occasion by reading lists such as this even if you’ve been flipping houses for years and have many successful flips under your belt.
- DON’T neglect to check out the neighborhood before you buy. You want to visit during a weekday, weeknights, a weekend day and weekend night to get a real feel for the neighborhood. This also can tell you things you might not know from just one or two real estate agent walk-throughs, such as if you think you might need to invest in extra security during construction. Just as important, you will want to make sure that the property you are considering is a good fit for the neighborhood and that the plan you have in mind for the property will match well with the other neighborhood residents in order to guarantee a quicker sale.
- DO set your budget and stick to it! If you blow your budget and cannot recover the extra money you’ve spent in the selling price on the house you will have seriously cut into your profits if not eliminated them altogether. The goal of every flip is to get in and out quickly and spend as little money as possible in order to make as much money as possible.
- DO set daily goals and hold yourself accountable. If you don’t reach your goals for the day it can set the entire project back by as much as a month depending on the goals and what has to be rearranged as a result. Stick to your timeline and your daily schedule in order to avoid potentially costly delays in time and money.
- DON’T forget how important curb appeal is to buyers. So many investors will shoot themselves in the foot with this issue because to a savvy flipper it’s just “exterior paint and some inexpensive landscaping”. A run-down exterior to typical homebuyers, however, means to them that the inside is the same and worse, that the property will be a huge money pit. If you spend all your money, time, and effort making improvements only on the interior you will have little left to make the outside appealing to buyers. This means they’ll never step foot inside to give your house a chance.
- DON’T spend money you don’t need to spend. While it would be great to put in granite countertops and gourmet kitchens into every home it isn’t always practical and this is often money that will not be recovered, particularly in homes that are in marginal neighborhoods. If you want to get the most for your money avoid costly expenses that aren’t exactly necessary for the successful completion of the flip. Resurface bathroom fixtures rather than replacing them if possible and use new cabinet doors or hardware rather than adding new cabinets all together to cut down on expenses. In other words, salvage what you can, fix what needs to be fixed, and add a few cosmetic touches before moving on.
The market for real estate can be fickle so being prudent is always the safest bet. Avoid risking too much time and money on a property that isn’t going to recover those added touches and expenses. Instead, hold onto those ideas for higher-end flips once you have a few successful flips under your belt. This isn’t to say that sometimes an investment in something more high-end won’t pay off, but when you are just starting out it’s better to scope out the neighborhood, do your homework, work with a mentor if possible to manage your risk and increase your profit potential.