The business of flipping houses has gained quite momentum in the real estate world. It has become a popular business. Some people who are quite eager to make a huge profit overlook the basics of flipping and end up unsuccessful. There are generally five mistakes that should be avoided in order to be successful.
Impatient Investors
Investors can be classified into two categories namely professionals and novices. Professionals deal with patience. They wait for the right time to acquire the right property. Novices on the other hand are very impatient and are always in a rush to make a profit. Novices hire another person to sell the house on their behalf, where as professional sell the house by themselves.
In-house Skills
The real money of flipping a house comes from sweat equity. A person can make more profit if he possesses skills of a carpenter and a plumber. He can fix the house himself rather than hiring outside professionals to do his work. Reduction in costs will boost profits. On the other hand if you hire a carpenter or a plumber then your profit margins will be quite slim.
Not Enough Knowledge
In order to be a successful flipper you need to have knowledge of the conditions prevailing in the market and also the knowledge of the subject matter. You should also possess knowledge of the area in which you are purchasing the property.
Not Enough Money
Doing a real estate business is a very expensive proposition. There are lots of costs involved in it. The initial cost is the acquisition cost of the property. Other costs are repairs expenses. You need to have huge amount of money at your disposal.
If you are financing an acquisition, you need to take account of he interests costs involved. In order to be successful you need to compile all the costs incurred, so that you can arrive at a figure at which your sales will break even. You will also have to consider capital gains tax, which can reduce your profits.
Not Enough Time
Renovation and flipping of houses is a very time consuming activity. It can take months to acquire and sell the right property. Even if the property is acquired quickly; it is highly likely that it will be in a good condition. You will also have to invest time in the repairs and renovation of the property.
After doing the necessary repairs and renovation of the property you will have to locate potential buyers. Locating potential buyers is a very time consuming activity. You will have to invest time in locating potential buyers. There will be lots of visits involved along with travelling. You have to be patient enough to make a success in flipping a house.
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Posted by Batool Shamim in Real Estate · 2 Comments
Amen to new investors being impatient and running into problems because of it. I can’t blame them. When it is so hard to find that first deal, we can’t help but to be impatient. One of the biggest mistakes I’ve seen is ‘working’ the numbers to make a deal work for a house flip. The numbers are the numbers. They either work or they don’t.
You are definitely correct in diagnosing the problem of impatience on the part of new investors. It can be very tempting to fudge the numbers a little to make a deal seem viable for a house flip. You have to figure out your maximum offer based on the hard facts of what the house will cost, repairs costs and what you can realistically sell it for.