3 Common Mistakes You Should Avoid When Flipping a House
Written by
Adam Palasciano
Edited by
Nicholas Morine
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House flipping has become more popular in recent years. The Motley Fool reported that in 2022, 407,417 single-family homes and condos were flipped, roughly 8% of all home sales in the U.S.
Rather than purchasing an investment property and renting it out, house flipping allows you to make an investment and then sell it off to make a profit with no long-term property management involved. This is one of the most appealing aspects of flipping a house.
However, there are several mistakes you’ll want to avoid when flipping houses to make sure the venture turns out to be a profitable one.
Mistakes To Avoid If You’re Flipping Houses
Here are three mistakes you’ll want to avoid if you’re looking to flip houses to make a profit, according to Entrepreneur.
- Doing too much renovation: If you’re purchasing a distressed property, doing too much renovation can lead to financial risk. Excessive renovation can lead to a risk of overcapitalization, a reduced overall ROI when you sell the property — and potentially result in a property that’s incompatible with the neighborhood.
- Underestimating the total cost: When flipping a house, there are many costs you’ll have to consider.
- Financing costs: Loan and interest payments while you own the property.
- Carrying costs: Loan interest, homeowners insurance, property taxes, and utilities. The longer you own the home, the more expenses you’ll incur that will eat into your profit post-sale.
- Marketing costs: Listing the property and advertising the sale.
- Renovation costs.
- Other hidden expenses.
- Overestimating your abilities: You might be itching to make your house flipping investment fast. However, consider your real estate market knowledge, renovation abilities, money management and negotiation skills, and time management skills before jumping in. Do you have a solid understanding of the real estate market trends in the area? Are you capable of executing some or all of the renovations on your own without the need for contractors? These are some of the questions to ask yourself before getting started.
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