On the surface, it looks pretty easy – purchase a house, make a few changes, relist it on the market, and make a profit. There is an array of television shows that have glorified this process, too, but these shows don’t tell the whole story.
While flipping houses can be profitable, you have to know what you are doing. Part of knowing what you are doing is knowing what mistakes to avoid. Keep reading to learn what some of these biggest mistakes are.
Not Having Enough Money
Investing in real estate, in any manner, is a costly endeavor. The first expense you encounter is acquiring the property. While a low or no money financing option may seem appealing, trying to find an offer from a legitimate vendor is extremely challenging. Also, if you finance this purchase, you are going to have to pay interest.
Even though the interest you pay on borrowed money is still considered tax-deductible, it isn’t a 100 percent deduction. Each dollar that you spend on interest will add to the amount that you must earn when you sell the property to break even. Also, if you choose a home equity loan or a mortgage for financing your purchase, only the interest will be deductible. The insurance portions, taxes, and principal parts of the payment are not deductible.
Not Having Enough Time
The process of renovating and flipping houses is something that is quite time-consuming. It can take you several months to not only find but actually purchase the right property. After you own the property, you have to put quite a bit of time fixing it up. If you work during the day, the time that is spent handing the demolition and construction is going to translate into no free time on the weekend or in the evening.
After all the work is done, you still have to schedule inspections to ensure your property complies with the applicable building codes before it can be sold. If it doesn’t, then you have to spend more time and money to meet these requirements.
Not Having Enough Skills
Skilled professionals and professional builders often flip houses as a source of side income to their day jobs. They have the experience and ability to find and fix this property. However, if you don’t have these skills and if you can’t put in sweat equity, you will have to pay even more to hire someone who does this.
Flipping Houses: Be Prepared
When it comes to flipping a house, there are more than a few factors that must be considered. Be sure that you avoid the most common mistakes, too, which are found here. Doing so will ensure that you make the most of the investment that you have made and that you will have the biggest opportunity to actually make money on the house that you purchase and flip. In the long run, flipping houses can be a lucrative business; however, you have to take the right steps.