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Flipping real estate is a potential lucrative business option for those who want to earn some decent cash. However, it’s not for everyone. While many people believe that house flipping simply involves purchasing a fixer-upper, making renovations, and selling at a higher cost than purchased, there’s far more to it. Take note of these common house flipping mistakes that lead to a loss, so you know what to avoid.
Not Considering Spending Cost
House flipping is a serious business. After all, residential property isn’t cheap. Anyone looking to get into flipping rundown houses must keep spending cost in mind. This isn’t limited to acquisition cost, either. Keep in mind interest, taxes, mortgage, holding costs, opportunity costs, repairs, and upkeep. Each of these has considerable budgetary constraints that may impact your decision. Even if remodel upgrades aren’t needed, they still increase curb appeal and ROI. Consider using a hard money lender for quick, flexible real estate financing in your area.
Doing No Market Research
Similarly, if you jump into a house flip without doing any market research, you’re already setting yourself up for a net loss. A successful house flip means taking your time. Do your due diligence and choose the right location, property, and price. The local real estate market will show you reasonable price expectations so you’re not setting yourself up for disappointment. Relatedly, zoning laws, local taxes, and knowing when to cut losses to reduce overspending are important considerations, too. House flipping is a gamble, but with the right research and knowledge you can mitigate the chances of a loss.
Finally, being impatient is another common house flipping mistake that leads to a loss. Do not just purchase the first house on the market with a promising price. Nor should you hire the first contractor on your list for repairs and upkeep. Tying back into doing your research, take your time with this process. While you never want a house as a long-term listing, waiting for the right property, contractor, and sale cost minimizes budgetary expenses and increases profits. It’s okay if profit margins are slim. You should never expect top-of-the-line sales, or you set yourself up for disappointment.