If you are a new investor and you are interested in getting started flipping homes, then you do have a great deal to learn. If you know the pitfalls and problems that can come along, you will have a much better chance at succeeding. The truth is, many new real estate investors fail. Most likely, the majority of investors fail, and they do not have to. If they only avoid certain problems, they could have succeeded. Instead of going down that path to failure, you need to learn now so that your business can be successful. Here are the five reasons why new investors fail so that you can make sure you avoid them.
1. Over Paying for that First Flip
The first home flip can make or break your new business. While there will most likely be plenty of things that will not go as planned during that first flip. That part is unavoidable. However, the big mistake that many new investors make has to do with the actual purchase. They may not do enough research, and with the determination to make that first purchase, they may pay way more than they should for the home they decide to flip.
Over paying for a home will leave you in a tough situation compounded with rehab costs, while being able to sell it at a price to make a profit could pose a loss. A loss for a brand new investment business could be too hard to overcome.
2. Lack of Planning
Another reason why first time investors have trouble succeeding is that they jump in head first without any sort of a plan or budget or scope of work for the flip itself. They may have a grand idea of getting the flip done in a certain amount of time without any idea of how to get the actual work done in that time and at what cost. Without a plan, a flip could turn into a disaster.
3. Forgetting to Supervise
Often, first time flippers think that all they will have to do is hire contractors and then they can walk away from the home until the flip is done. However, this could lead to disaster as well. When a flipper leaves all the work to the contractors, there is so much that could go wrong without their knowledge. Decisions are made on the spot, should a contractor make one on your behalf that is a wrong one, you have to live with it. In addition, not all contractors are trustworthy. With out supervision, they could drag their feet getting the work done, take 3-hour lunch breaks or do other side jobs while they are supposed to be at your job site.
4. Setting Up Unrealistic Timeframes
So many first time flippers have no real idea how long it actually takes to complete a flip. They may think that they can set a lofty goal to avoid more carrying cost expenses. A good rule of thumb to follow: Give yourself six months; plan all your carrying costs and expenses for 6 months, then work towards getting it gone in three to four months depending on the extent of work needed.
5. Going Overboard with the Flip
Many people who are first time flippers make a very big mistake. They start designing the home based on what they would want for their own home. They may pick out designer tiles or trendy paint colors. When this happens, it could be much harder to sell the home. You will cause potential clients to walk away if they look at your house and think that they will have to change too many things. It is better to keep your personal taste out of the flip and choose neutral options.
First time flippers certainly face a number of hurdles to getting their business off the ground. Many real estate investors fail simply because they make these easy to avoid mistakes. You can make sure your business has a real chance to succeed if you avoid these five mistakes.
Joe Abbascia is an expert property investor providing vital knowledge on how to buy properties wholesale, about flipping homes successfully, and more. You can learn more by visiting PropertiesCentralWholesaleDeals.com -today.
Comments(1)