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Flip Project - 2 Major Issues
There are two major problems when flipping houses that I frequently see. People believe that flipping houses is so easy that Vanilla Ice can do it.....wait a minute. The truth is , that anyone can do it but it is usually not as easy as they make it look on TV. There are some very common mistakes to look out for and avoid if you are going to buy properties to flip. These two topics can help you save and make a lot of money by avoiding them or cost you a fortune if you commit them.
The first mistake that I see a lot of people make is that they buy too high. I receive a lot of inquiries every day for people looking to flip a property. I see the construction numbers, acquisition price and address. Within 10 minutes I can tell right away if the acquisition price is too high. The majority of people trying to flip tend to try to buy too high. The problem with buying too high is that instead of making money the flipper will now be working from a position of trying to protect their money and not lose it. The first saying everyone learns in real estate investing is 'You make your money when you buy'. This is also one of the most important statements in the business from the day you begin to the day you stop. It holds true.
The second mistake that people make when trying to flip properties is they are not accurate on their construction numbers. If you go over on your renovation costs by $10,000 then you might as well have just paid an extra $10,000 for the property. It is the same thing as buying too high. Many people try to make a deal work by tricking themselves into skimping on construction numbers. They want the deal to work so bad, they think that a $45,000 renovation can be done for $25,000. They then find out the hard way that it is not the case. My suggestion is to not only build your renovation budget as accurate as possible, but put in a 20% buffer. If you do this and your numbers are correct, then you just made an extra 20% of the construction budget and turned it into profit. If you are right in using the buffer because unforeseen items arise, then you are safe and you anticipated it.
Learn to plan properly and buy low when flipping houses. It is certainly worth taking an honest look at yourself and your deal. You have to detach yourself from the emotional end of the deal and ask if you truly are buying at the right numbers and if your construction numbers hold up.
Ian Walsh
215.839.3271
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