Many people try to flip houses, but end up putting too much into it and losing money overall. Their flip becomes a flop. Below are four tips to make sure flippers put their time into a project that will give a return on their large investment.
Run the Numbers
Before purchasing a home and starting demolition, real estate investors should run all of the numbers to make sure they will receive their money back and more. They should also make sure they have a miscellaneous line item on their budget for unexpected costs and fees. If a full forecasted budget is not set beforehand, mistakes will easily be made. Investors must make sure everything calculates out before deciding on a property to flip.
Great Home + Bad Neighborhood = Bad Idea
Understanding how much the value of a home can increase based on the neighborhood is key to make sure investors do not invest in homes that don’t have the potential. If investors decide to purchase in a bad neighborhood, they must take into consideration how much renovation is over improving for the neighborhood.
Understanding Home Values
Flippers should purchase homes under fair market value since other buyers will be turned off from large projects. Flippers should also learn what the fair market value of the home will be once renovations are done. Again, if the investors do not run the numbers, they may be setting themselves up to fail.
Keep up on Contractors
Many contractors will go over budget or over schedule. Flippers must keep up on their contractors in order to make sure their project is not going out of control. If flippers find reliable contractors, it is best to stick with those rather than go slightly cheaper the next time since those new contractors may go over budget anyway.
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Photo Credit – Tanamera Construction