The art of flipping houses may sound like easy money, especially to those who only just heard about the practice. However, those are the ones who learn hard (and expensive) lessons the first time they try.
Those who enter the market prepared might not face as many unpleasant surprises but will learn a thing or two either way. It’s valuable for getting experience, but if you do some research first you can at least avoid losing thousands of dollars.
There are things you’ll inevitably learn when you flip a house for the first time, but with some reading and research, you can at least prepare for them, both in positive and negative ways. Even so, be patient and careful with all the decisions you make in the market of house flipping.
Here are three lessons house flippers learn on their first project:
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3 First-Time Lessons for House Flippers
Cooperation and Provision of Services
With some skill, anyone could do the job of sanding and painting a house if required. However, precious rough diamonds that could be flipped into a lot of profit demand services to a degree much higher than that.
Therefore, if you are planning to take care of everything by yourself, you should reconsider. The first reason is that time is money in the house flipping industry, and you will save a lot of both if you don’t take this risk.
By hiring the right people with the right skills, you avoid making expensive mistakes and you speed up the renovation process, which allows you to save money on interest. Also, their experience and know-how will allow you to have a service as it should be. In addition, you will have someone to blame if some service doesn’t work just as you wanted. That’s the reason why cooperation with a good contractor is a must.
In terms of cooperation, you can also get in touch with the community where you wish to buy a house to flip. You can join a local meetup before even buying a house so you can get to know the locals who might have useful skills for you to hire. They might also be able to tell you things you don’t know about certain neighborhoods that you can’t find online.
Over and Underestimation
Most of the time, it’s impossible to be precise, so the lesson is that you can basically never escape needing more or less of something, but over time you can get better at predicting your needs.
Money can easily be over or underestimated, but time is also a very important factor. As it’s known, the purpose of house flipping is to refurbish and sell as fast as possible with maximum profit. Taking too much time can eat into your margins.
There is a chance you’ll overestimate your budget, which is a lesson that comes accompanied with a relief. At the same time, it’s best to always add around 1/3 of the value you expect to spend in repair. That way, you avoid the negative surprise: having to source money in a hurry. And instead, you’re left with a surplus.
There is no perfect formula for it, but you can find how to calculate your fix and flip cost on the web.
Another negative is underestimating the time it may take to finish a house flip. Although most of the time that only results in frustration, it’s best to get estimates from contractors for every service and try to map out your schedule in detail. That is how you get to know, when to plan visits and begin marketing to sellers.
Keep Track of Everything
The organization is the critical case an audit occurs, so don’t wait to learn this.
In case you choose to work with contractors, it’s their job to keep those records, but you must need to ask for copies of your records. You’re in charge of keeping track of all expenses and keeping an eye on how you’re pacing against your budget. If you go out of your budget, it’s all up to you and you don’t want to learn that too late.
You can learn practical ideas to organize your expenses and avoid future problems with complete guides on the internet. It’s also key you track your fix and flip loan details and other related expenses. Must pay attention on how much you’re paying in interest and fees. Have a deep look on the contract carefully to make sure you won’t be charged prepayment penalties, too. Keep copies of everything and stay organized so you can find important documents at a moment’s notice.
Due to the size and complexity of a house flipping process, every deal is a new experience. That doesn’t mean you won’t be able to apply what you learned before and save time and money.
Getting to know about it is also an excellent manner to avoid problems, especially if it’s your first time fixing and flipping a home to sell. Now you are at least a bit prepared to what comes ahead. Good luck!