5 Mistakes that Make House Flipping Idea a Flop

1: Insufficient Capital

Purchasing a house to flip requires a considerable amount of cash on hand. You first need to purchase the property and cover the closing costs associated with the acquisition. After buying the property you will need to come up with the cash to cover both building materials plus labor costs which can rack up very fast. Aside from having this cash available you need to factor in a margin of safety. This is cash that is used to cover unexpected delays and protect you from running out of cash. If you run out of cash it puts you at a disadvantage when it comes time to sell the property for top dollar.

2: Lack of Expertise

When starting out in the home flipping niche, there are many things to learn. This learning curve varies from person to person. One of the most common mistakes that a person makes is accepting the first offer when trying to flip their property for maximum profit. This is very common when flipping houses, so it helps to align with experts in the home flipping niche who can mentor you.

3: Lack of Renovation Experience

This may sound like #2 but it is not in the same wheelhouse. When renovating properties, you are looking for the most cost effective option. The only way to identify those opportunities is with practical experience. An example of this is instead of paying a premium for hard wood flooring you could use laminate flooring which creates a similar visual effect but for a fraction of the cost. The ability to identify and exploit these opportunities comes with time so don’t be too hard on yourself at the start.

4: Lack of Availability

You have to treat this as your full-time job. There are some people who fall in love with the romantic notion that they can find a house, do a small amount of renovation work and flip it for a huge profit. You can and will make money when flipping houses but it will take your full concentration. There are many challenges you need to overcome. The first is finding the right workers to work with you as you purchase and flip homes. By having a stable base of labor you will be able to get consistent quality work which allows you to rapidly renovate and flip properties. The challenge is making sure you are available to ensure these deadlines are being met.

5: Impatience

This is one of the biggest reasons home flippers lose money. You have poured your time, money, blood, sweat, and tears into this property and want to get your money out of it as soon as possible. This impatience comes with an opportunity cost attached to it. If you have enough cash on hand you do not have to accept the first offer which may be a “low ball” offer but hold off until you get something near or above your asking price. By developing self-discipline, you will be able to get closer to the asking price of your property and turn a profit.

If you are able to address these five common mistakes, the odds of you becoming a successful house flipper will increase dramatically.