Flipping houses can be a lucrative business venture, but it’s essential to know the right way to do it. With more and more people trying their hand at flipping houses, many are making mistakes that could ruin them. Here’s how to avoid those six common pitfalls:
Mistake #1 Not having a plan
One of the worst mistakes you could ever make would be not having a plan of action. Whether you are flipping houses as an investment for your future or because you want the extra money, you will only make any money if you have some game plan.
For this, you could use flip analysis software to see what deals are out there and which one would yield the best return on your initial investment. Flipping houses is not an easy task, especially if you are trying to make back your initial investment right away. You need to be patient and build up funds for future investments while selling the house to get a good return.
Mistake #2 Not knowing your numbers
If you do not know your numbers, then there is no way that you will be able to flip houses the right way. What exactly does it mean to know your numbers? Many people think they know what their money is coming in, but they do not.
For example, how much will the monthly mortgage payment be? How much are the utilities? What will it cost to repair the house after you buy it? It would be best to answer these questions before you sign on that dotted line. If you do not know your numbers, then there is no way that this business venture could ever work out for you.
Mistake #3 Hiring the wrong people for the job
Hiring the wrong people for this business venture could be as bad as not having a plan. Who are you hiring? For what purpose? What is their job description? How long will they work with you? These are all questions that you need to ask yourself before hiring anyone.
For example, if you hire contractors to install electrical power transfer hinges on the doors, you should be with them at all times to make sure they do it right. Also, if you are hiring laborers to dig up the old concrete in your backyard, you need to make sure that they are not just digging but loading the dirt into trucks correctly so that you get good money for that dirt when you sell it back to the company.
Mistake #4 Taking on too many projects at once
Taking on too many projects at once will overwhelm you and breed laziness. For example, if you are flipping houses, it would be best to do one place at a time instead of trying to do all ten simultaneously.
Trying to do too many things will only cause them not to get done right or not done at all. So, don’t make the mistake of having too many irons in the fire at once because you could get burned by them.
Mistake #5 Not finding the right location for your flip
Finding the right location is just as important as finding good deals. Finding good deals alone will not make you money. You need to find an area in high demand so that you can charge more than what it would be worth if the house were vacant on the market.
For this, you could use the prices from other houses in the area to decide what you can charge or receive for your home. If you are not finding the right location, then the deal might not be as good as it looks at first glance.
Mistake #6 Mismanaging finances and cash flow
Mismanaging finances and cash flow can kill a business venture. If you are not managing your money well, the business could never succeed. For example, if your house is not selling fast enough, you might need to lower prices for it to sell faster, but be careful when doing so because even though reducing prices could help sell the house quickly, it could also affect your return on investment.
So, keep track of your expenses and your income to manage your cash flow well. Do not spend more than what you are making because it could cause the business to fail. Otherwise, you risk not making any money at all.
The key to flipping houses the right way is to have a well-thought-out plan in place before you do anything else. Although the process may seem complicated, it’s not. The numbers are the key, and if you stick with them, then there is no way that this business venture could fail.