Believe it or not, Tarek and I started flipping houses with very little experience in investing. We were real estate agents for many years, so we thought we knew the real estate world - including investing - backward and forward.
Little did we know, there was a lot we needed to learn to become successful flippers. Needless to say, we made many mistakes along the way, and I'm sure some of them could have easily been avoided.
As a flipper, especially if you are brand new, you will make mistakes. Don't get discouraged if you mess up, it happens to all of us.
But learning how to avoid mistakes in the first place will save you valuable time and money. Here are five ways you can take your flipping experience in the wrong direction - and how to sidestep these common errors.
Underestimating your repair costs
Unfortunately, this is one of the easiest mistakes you can make as a flipper.
When starting out, most flippers have very little idea how much renovating a property will actually cost, and they end up budgeting a random amount.
I'll be the first to admit that accurately estimating repair costs is not easy. Even after years of investing, Tarek and I still sometimes underestimate repair costs.
More often than not, you won't see repairs or know about them until you actually start renovating. If you don't plan for these hidden repairs in your budget from the get-go, it can be really frustrating having to scrounge up extra money to finish your project.
I recommend working with a contractor when estimating repair costs, as they will be able to get a much more accurate estimate than you will. Tarek and I also add an extra 10-percent buffer to our budget to give us peace of mind when unexpected repairs show up.
Not having a set plan
I know many newbie flippers who find a good deal on a house, make an offer, and then they come up with an action plan after they purchase the house.
I hate to break it to you, but this is not a smart idea! While I know that finding a good deal is exciting and often hard to pass up, you need to have your investing strategy set in stone before you start buying houses.
Once you know your plan, you'll be able to tell which homes fit within your plan, and everything will fall into place.
Listing your finished flip too high
After investing countless hours, and a large chunk of money, you'll obviously want to sell your flip quickly so you can make a profit on your hard work.
But if your flip ends up going over budget, takes longer to complete than planned, or makes less money than you were expecting, you could be tempted to list the house for more than you can easily sell it for.
If your flip sits on the market for more than a month, people will begin to wonder what's wrong with it, and then it will be impossible to sell. You may end up losing money because you can't get rid of the house.
When deciding on a listing price, compare your flip with comps in the area and base your price on them, even if it means losing money.
I promise you'll be better off in the long-run if you can get the house off your hands fast.
Hoping to get rich quick
Flipping is not a get-rich-quick scheme. As with any other form of long-term investing, it takes time and patience - and in this case, a lot of blood, sweat, and tears.
Many newbie flippers begin flipping houses with the hopes of making a profit easily and quickly, only to find out that it requires way more time and money than they had anticipated.
If Tarek and I wanted to make money with very little effort, we certainly wouldn't have taken the flipping route. We decided to flip houses because we love real estate and enjoy the renovating and remodeling process.
Avoid falling into the trap of hoping you'll get rich quick through real estate investing by making sure it's something you actually want to dedicate a lot of time, money, and hard work to - before you start.
Doing everything by yourself
Many flippers think they can do everything on their own, but one of the keys to being a successful flipper is having a team of experts to help you along the way.
I recommend that you start with a real estate agent, home inspector, appraiser, lender, attorney, and a contractor on your team, and then expand once you get your business going.
Starting out with essential team members will help things run more smoothly, and will prevent you from taking on everything by yourself.
Investing in real estate is not easy. If it were, everyone would be doing it. Learn how to avoid making these mistakes from the beginning, and you'll be on your way to flipping success before you know it!
- The Highs and Lows of Flipping Houses
- How to Build a Home Renovation Team You Can Trust
- The 6 Stages of Flipping a Home