Although house flipping has proven to be a highly profitable venture for countless investors, it’s pure folly to assume that every flip will be an equally successful undertaking. There are a variety of reasons for which problems occur during house flips, and depending on the scope of these issues, you may even lose more money than you stand to make from this endeavor. So, if you’ll soon be tackling your first house flip, there are a number of problems you’ll need to nip in the bud.
Determine How Much Work the House Needs Done
While every house flip will require you to undertake some repairs and/or renovations, some homes need a lot more work than others. Additionally, depending on how much work a prospective flip needs, you may ultimately wind up spending more on repairs/renovations than you stand to make from selling the home. As such, it’s important to determine how much a home needs in advance of purchasing it. Needless to say, discovering that the cumulative cost of various repairs/renovations after you’ve already invested in a potential flip stands to leave you in a difficult position financially.
When working to determine how much work a home needs, enlist the services of a certified home inspector. This person will be able to spot a wide range of problems that non-professionals are practically guaranteed to miss. Upon receiving the inspector’s assessment of the home and quotes from assorted contractors, you’ll be in a good position to make an informed purchasing decision.
Research the Location Beforehand
It’s hardly an exaggeration to say that location is everything when it comes to real estate. As one might expect, homes found in desirable areas with strong local economies, massive growth potential, low crime rates and good schools tend to command high prices, where homes located in areas considered to be undesirable don’t always represent the best investments. After all, no matter how thorough a job you do on renovating a flip, you’re liable to have trouble turning a profit if the property is based in a less-than-desirable area.
You can save yourself a tremendous headache by researching the area in which a prospective flip is based before proceeding to get started on any paperwork. Throughout the course of your research, make sure to familiarize yourself with local home prices, growth rates and crime statistics. Regardless of how many amenities a flipped home has to offer, most potential buyers are likely to walk away if the location leaves a lot to be desired.
Work with Contractors You Trust
Giving your business to the wrong contractor can facilitate massive headaches and strained financial resources. So, before proceeding to hire a contractor, make a point of doing some research beforehand. For starters, confirm whether the individual in question is licensed and insured. If the answer to either of these is no, shift your focus to other contractors.
Working with an unlicensed contractor may strike you as a cost-effective move, as these individuals tend to charge less than their licensed contemporaries. Still, you may quickly learn that doing business with an unlicensed contractor is a bigger drain on your budget than hiring a licensed contractor. For one thing, unlicensed contractors have very little incentive to complete jobs on time or on budget, as they aren’t really risking anything if they don’t. Furthermore, if an unlicensed contractor is injured throughout the course of their work, you may find yourself stuck with the resultant medical costs.
You should read through reviews and testimonials from former clients. Although every contractor is liable to have accumulated a few unfavorable reviews, a contractor whose feedback is overwhelmingly negative generally doesn’t represent a safe bet. Your ideal contractor should also be adept at obtaining the proper permits for their work and know their way around permitting software.
A flipped home found in a desirable area is likely to produce a healthy return on your investment. However, this doesn’t mean that every flip goes off without a hitch. For example, there are a million things that can go wrong when people dive into their first flip unprepared. Fortunately, by familiarizing yourself with the most common mistakes first-time flippers make, you can help ensure that you’re able to avoid them.