When it comes to flipping houses for a living, there are few who will understand it better than a Reno commercial real estate agent. Among other house flipping tips, here are seven common mistakes that novice house flippers make. Reno real estate agents have learned that there is much more to flipping houses for a living than most people (and the media) make it seem. Yet, it is doable and very profitable if one has the determination and puts in the effort, not only to the work involved but to acquiring the knowledge. This is essential to successfully flip houses. You must also be willing to learn, change and adapt to the environment in which you work. From Reno real estate agents, here are 7 of the most common mistakes beginners make as they learn how to flip houses:
1) Becoming over-excited:
This is common in rookie house flippers. This comes from excitement and hopes from beginning the project. The media exaggerates the lack of effort needed to flip houses. This makes them overstep their boundaries whether it’s about buying, renovating, budgeting, or selling.
Many newcomers decide it’s a good time to flip houses when they see one they think they can make an easy $10,000 on. However, the reality is that there are a lot more expenses than those lying on the surface. For example, a top real estate agent in Reno will generally take more than 5.2% commission from a sale. If the property fails to sell quickly, taxes due on the property will also add up. These hidden costs can quickly drain a shallow profit margin.
3) Buying the wrong house:
There’s more to a house than outward appearance. Despite the need for the house to be presentable from the surface, the underlying damages can turn potential buyers away in the blink of an eye. Having a professional appraise the house before your decision to flip it is important. If you don’t, your potential buyer will, and this could lead to a house that is hard to sell.
4) Buying in the wrong location:
You should know why your potential house flip is selling at a low price to begin with. It could be a foreclosure, but other times it may be that the homeowners falling on hard times. Or they are selling their house to leave the neighborhood. Communities rise and fall all the time and their fluctuation can make a dangerous trap unless you understand and plan for the area around them.
5) Buying at the wrong time:
The market varies every day and in every location. As the market drops and prices go down it might appear to be a good time to invest in a house to flip. However if, once invested, the market continues to drop it will be harder to flip your house for a profit or get a reasonable return on investment.
6) Renovating in the wrong areas:
When inspecting the attic, you may find that there is a small amount of insulation and, if it was to be your house, you would not hesitate to add more. Or perhaps you want some extra cabinetry in the kitchen, but you can’t bear the idea of run-of-the-mill woodwork when you have a particular attraction to hardwood. It is easy to renovate based on an opinion of what needs work and what doesn’t. Yet some renovation can be costly and yet not raise the value of the home.
7) Keeping and using your allies:
Much of the real estate game is all about the connections you do or don’t have, and how much you make use of them. It is crucial to treat your contractors, realtors, accountants, and whoever might be working with you, with more than due respect. Spoil them, because once lost, they are gone forever and are difficult to replace. Also, use them and their talents making sure that you get the most out of it, saving both their time or your money.
An extra tip for budgeting your flip is the 70% rule. This is just a guideline that helps you stay safe inside your profit margins. To calculate using the 70% rule, find out your ARV (after repair value) and ERC (estimated repair costs). The 70% formula multiplies your ARV by 0.7 (70%) and then subtracts your ERV from that product. If the house you hope to flip costs more than the final number you end up with, it is usually best to patiently move on.