The Fix and Flip shows on TV make flipping look really easy, but there are many ways to lose money if you are not careful. Today’s blog and video discuss the top 10 ways that flips can bite you and what you can do to avoid these pitfalls. With 18 years of experience in renovations and flips here are some of the things that I touch on in this weeks video:
- Paying too much going in and not selling for enough on the way out; get a couple of unbiased valuations – the realtor you will use to sell the property once completed will be glad to give you a value ‘as is’ before you buy; I also discuss in the video a tip for how to get appraisors to help you value the ‘before’ property for less money; as a general rule of thumb you need to buy at around 50% of the after repaired value (ARV); be realistic about the ARV too
- Get an inspector to check out any big potential problems – roof, foundation, leaks, boiler etc
- Only do renovations relative to your target end user; don’t over renovate or under renovate
- Focus on first impressions (the walk up the driveway), kitchen and bathrooms; don’t blow your budget in the basement, for example
- Watch out for scope creep (veering off your intended schedule and budget)
- Get in and out as quick as you can to avoid potential changes in the economy; each month you will have carrying costs (insurance, taxes, utilities, loan interest); the longer you take to finish, the more these costs add up
- No big renos; stay away from things that add time like blowing out walls & adding new rooms or building a second story onto a bungalow / ranch;
- Don’t go into the walls if you can avoid it, especially in older buildings; you can run into some big problems with old electrical and plumbing; just simple painting, flooring, new fixtures etc
- Make sure you are properly financed; it is very hard and very expensive to find new financing mid project
- Don’t buy unless the numbers say so; keep your emotions out of it; people can get enamored with a new project and bend the truth to make it look like a winner
See the other videos I have done in the Flipping series on this website for other tips.
In 2019, I want to continue to build my mentoring business. If you want to talk about reaching your financial goals through Real Estate investing please click the ‘contact me’ button anywhere on the website.
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Happy investing, Darcy.