For anyone looking at getting into the house flipping business, it is important to understand some of the mistakes some have made in the past and, how to both avoid and fix these kinds of errors. House flipping errors can cost individuals tens of thousands of dollars (if not more), so cutting down on these errors is a must.
Running Out of Money
This is one of the most common errors to come up, yet with enough planning it is something that can be avoided. Nothing is more devastating than running out of money during the middle of a flip. Should this happen, an individual (or group of investors) will not be able to progress with the flipping process, which means the chance of making a quick sale falls by the wayside. This can further problems as the flipper might miss a key selling period in the year. They also will need to pay more taxes based on owning the house. The properly also will likely not be able to rent out either, which means it more or less simply sits until more money can be obtained. Nick Manfredi who lives in San Diego now says he ran into this problem on his first flip. Learned a major lesson but also points out why it is so essential to avoid it.
So how can a possible flipper avoid this kind of a problem? First, understanding what the likely repair costs of the house will be is important. Additionally, planning for unexpected costs is important. There often are expenses that come out of nowhere, so having access to extra finances is a must. In order to avoid interest on borrowing money to make the home purchase, it is much better to pay cash. A cash payment typically comes with a discount, not to mention it also helps avoid paying interest on the loans. Than Merrill a flipper and investor in San Diego has worked on more than 2,000 properties in California and Arizona. He says having the money first is always the best way to go.
Lacking in Skills
The best way to turn a profit flipping a house is having the skills to work on the property. Bringing in external professionals to perform most of the repairs costs a pretty penny. Skilled builders, ranging from electricians to carpenters eat up profit margins quickly. Many of these individuals work for unions, which boosts the cost of hiring them as well. The best way to cut down on costs is to have the knowledge and skill of doing this by oneself. In order to avoid a lack of skills, it is important to avoid moving into the flipping business until the necessary skills are obtained. Obtaining vital skills will help cut down on flipping costs and improve the return on investment.