House flipping can be rewarding both personally and financially. Many inexperienced house flippers can make rookie mistakes based on emotion or bad information that can cost them when they try to sell. If you are thinking of embarking on this form of real estate investing, avoid these pitfalls to get the best return on your investment.
Before buying a house, do as much research as possible into the area. House flippers may find that the price of the home is attractive because it is in an undesirable area that will make it difficult to sell. Flight paths, railroad tracks, and freeways will shrink your resale price no matter how skillful house flippers may be.
Conversely, some house flippers will purchase a house that needs work for far more than other homes on the block. Examine what other homes have sold for recently. Also take into account the state of the real estate market. If the market has taken a downturn recently, you can expect to offer much less than in a stable market.
It is also important to consider how much you can expect to sell the home for after the remodel. Although some house flippers may say that they can always sell for double the cost of the home, the local market may not bear such a price. Look at the homes in the area for what you can really expect to make.
Insist on a thorough home inspection before making an offer. Hire the best home inspector you can find, and make sure he checks attics and foundations. House flippers often have their own inspector that inspects all of their possible investment homes. Go over the resulting report carefully. If you are unsure what everything means consult with a professional.
Before purchasing the home you should also have a basic plan for remodeling. This should include the cost and time involved in each major project. Be sure to include a margin of error, in case the cost of labor or materials goes up. It is not uncommon for remodels to be double the estimated cost.
This basic plan should be a tool for deciding on a home to buy from a cost standpoint. Once you have purchased a house, you should get as detailed as possible with your plan. List large projects and break them down into smaller ones. Each small project should list the time to complete each step and the cost involved.
Once all of the projects have been listed, get out your calendar. Schedule each project and give yourself a deadline. Make sure that your projects are planned in a logical, chronological order. Many house flippers spread out costly projects over the course of the remodel if possible.
Keep in mind while estimating cost, that there will be material waste. Not every scrap of tile or drywall will be able to be used. Figure twenty percent overall waste and an additional twenty percent for material increases. These estimates should help you while budgeting.
Do not attempt to save money by buying cheap materials. Prospective buyers will often notice cheap materials and not make an offer. Cheap materials can often cause unwanted problems, such as cracking and breaking.
Consider also the tools you will require. Plan on purchasing professional grade tools that will do the job correctly. Although it may be possible to skimp on some tools, many projects will require specific tools to do the job in a professional manner.
Getting building permits are also an important part of house flipping. Although some house flippers consider them costly inconveniences, it is against the law to ignore them. Many buyers refuse to purchase a home that does not have permits for all major jobs. They know that an inspector will ensure that all work is done correctly and to code.
Flippers decide to ignore applying for a permit, they should beware of the consequences. Not only are there often fines involved, but the city may require the house flipper to tear down his work and start over. It is not uncommon for neighbors to report construction activity, so be aware that a building inspector may come knocking on your door.
Experienced flippers will know how much work can be done without help. Sometimes the code specifies that you must have a certified technician complete certain work. This often includes major plumbing and electrical changes. Other jobs require special expertise, while others may be too difficult to finish.
While doing any job, you should be sure to observe all possible safety precautions. Making alterations on the roof or electrical system can bring their own set of risks. Be sure you are wearing the appropriate safety gear for each job.
Even with all your planning an permits, the unexpected often arises. Make sure there is room in your budget for delays or unnoticed problems. A termite infestation will require an exterminator and may set back the project for a week or more. Weather can also cause delays that can cost house flippers money or at least make an alteration to the schedule necessary.
Skilled house flippers can make an excellent living or supplemental income. For many people it is highly enjoyable, presenting a changing, challenging work environment. With careful planning and a lot of hard work, you should be able to turn your effort into cash.