Flipping property is rising in popularity as a form of real estate investing. The truth of the matter is, this is one of the more entertaining methods for many investors that are simply ‘itching’ to get their hands a little dirty. The sweat equity involved in these transactions, while attractive, can also be daunting when skills are inadequate and dangerous in some situations.
Minimizing Those Flipping Risks!
If you are one of those investors who consider the appeal of flipping property with huge dollar signs in your eyes, you should take care to avoid the following things to minimize your risks so you can maximize your potential for success.
Do not overestimate your abilities. This is a mistake that many investors make. You get excited and want to DIY the crap out of the property you just bought. Sorry to say but, the fact that you’ve seen something done on television, doesn’t mean that it is something you can do on your own (special apologies to those rightfully obsessed with Pinterest). It costs more money and time to have someone come in and repair your mistakes than to have had a professional do the work from the beginning. Plumbing, electrical, and structural work are generally best left to the professionals unless you have specific experience or training in these fields. It will help to get a qualified inspection of the property before any money changes hands. If you do not have any idea of the types of work that needs to be done then you cannot possibly make an educated estimate of the costs involved in rehabbing the property.
Forgetting to keep up with receipts, bills, etc. can lead to an unorganized flip, reconcile the facts and figures daily so you don’t stray from your budget. It is far too simple to allow a couple of trips to the local home improvement center escape scrutiny. Add a couple of these trips per day and you could easily find thousands of dollars missing from your budget with no paper trail to explain the transactions. You could also find that some tools will not work or be needed for the project. Those items cannot typically be returned without the original receipts.
Underestimating the budget for repairs on the flip can lead to a costly mistake. This is one of the most common mistakes that even seasoned professionals make and it can mean the difference between a profit and a loss on the property if you aren’t careful and do not stick to the planned budget. Hold yourself accountable to your timetable and your budget. Real estate investing puts you in the boss’ seat and while that is often simple when it comes to driving others, we often have a bit of difficulty when it comes to holding ourselves accountable for time and money along the way. Unfortunately, failing to do so can be a very costly blunder.
Avoid poor planning. This is one step that is the difference for many would be house flippers between success and failure. Plan out every step of the project in an order that makes sense. Plan things out in the proper order and allow a day or two between subsequent projects in case extra time is needed. The last thing you want to do is pay a group of contractors to stand around waiting for the paint to dry so they can begin the next step in the process, which leads to our next point. Avoid having too many chiefs on the project. If this is your ball game then you need to run with it rather than having 10 people giving contradictory orders. Schedule meetings regularly to discuss progress and any adjustments or changes that may need to be made.
Flipping Houses All Summed Up
There are risks involved in any type of investment. While real estate is one of the greatest things in the world in which people can invest, there are still risks involved. Following the advice above however can significantly lower those risks and allow investors to have great expectations when all is said and done. Before you even begin to start flipping houses, do your research and use common sense to figure out tricky situations. Whether this will be your first flip or your fortieth flip there is much that can be reviewed in the steps above that will reaffirm many of the things you’ve learned along the way.