Congrats on deciding to flip a house! This investment opportunity can be an excellent way to generate income or have some fun cultivating a side project. To limit the potential risks, here are some mistakes to avoid when flipping your first house.
Spending Too Much on the House
The first rule that all house flippers need to follow is the 70 percent rule: when buying a house, never spend more than 70 percent of the projected after-repair value. You want wiggle room for when unexpected costs come up. Furthermore, you will also be putting hours and hours of work into this house—you deserve to make money for this!
Miscalculating the Repairs
This may be a painful lesson to learn for newbies and goes hand-in-hand with not purchasing the house for too much. You can avoid paying more on repairs than expected by working with a trusted contractor to quote you prices and give an accurate timeline for fixing everything. Ask for their advice on what fixer-upper projects to prioritize and any tips for flipping houses they can share.
Neglecting Easy Fixes
If you miss out on the low-hanging fruit of easy fixes, you are making one of the biggest mistakes to avoid when flipping your first house. It might be tempting to expand the kitchen or completely renovate the master bathroom, but these won’t mean much unless everything else is in tip-top order. Luckily, you’ll still find a bunch of buyers who are comfortable with unspoken simplicity. Plus, this is easier on your budget anyway.
Going Overboard With Fancy Upgrades
Know your market and what sells in the area. Not all fancy upgrades will fit in your local housing market. You don’t want to spend more than necessary on silly upgrades that turn away buyers. Visit other open houses in the area to get a feel for what is selling nearby. Be mindful of upcoming trends as well. If mid-century modern is all the rage in the area, then you don’t need to be splurging on maximalism-inspired finishes across the floor plan.
Becoming a home investor takes a lot of trial and error. Be conservative in how you spend money, plan for unexpected costs, and learn along the way.
