Over the past few years I have been invited to share my house flipping experience with a few local investor groups. These audiences are usually made up of investors with varying levels of experience. By far the largest group is those who are wanting to get started. Not only do they want to start but they are trying to figure out exactly what to do but also the pitfalls they want to avoid.
13 Pitfalls That Can Derail Your Flipping
The challenge is that there are so many things that can derail you before you ever start. That’s why I decided to put together a list so you can start to identify these pitfalls and sidestep them when they come across your path.
Thinking you have to know it all before you start
We all know there is an abundance of information out there when it comes to house flipping. TV shows, blogs, infomercials, big ticket coaching programs, you name it. All of it is helpful but it can make you crazy at the same time. And, with some of the information online, you don’t necessarily know what the extent of the experience is that people truly have. Just remember, that for all of the information that exists, there is no substitute for doing. And take it from someone who knows, you do not need to know every type of offer strategy in order to start marketing. You just need to commit to taking the first step. So if that’s flipping, you need to commit to making offers.
Believing you have to have _____________ to be successful
Add any one of these to the blank above:
Experience
Money
Connections
Knowledge
Mentor
Inside track
Whatever you think you need I can tell you firsthand it’s not true. How do I know? Because I had none of those either. The one thing I did have was a line in the sand moment where I decided I was going to flip just one house. If I didn’t I would always wonder if it would be something I could do. And I happened to make that decision in 2008…during a period of time where the economy was just a little bit off.
Not researching your market
No matter what stage of the process you are in you should be frequently looking at information on the market where you are going to be working. The best part of research is that you can do it from the ease of your own home. If you have ever checked out Redfin, Zillow or Realtor.com then you have access to research your market. When you are getting started, the information that you can find on these sites is the same as the information on the MLS ( Multiple Listing Service
Skipping out on networking
It may not always be the feel productive but I can personally attest to the fact that attending real estate investing events makes a difference. It may not even be something you notice right away but the connections you make will impact your business. I have met private money lenders, cabinet distributors, hard money lenders, counter-top fabricators and other investors.
Waiting to build your team
One of the big pitfalls people make in flipping is waiting to build a team. When it comes to finding the right people to work with it can take some time. Get started now collecting names. Ask for referrals, jot down names and phone numbers from places where you see renovations going on.
Not researching your funding options
Even when you have the cash to buy and renovate a house, are there other options available that may be comparable or even better? If you don’t look, you’ll never know. For the first few years I was flipping, I was using cash to fund the majority of my projects. I didn’t realize that by structuring my business that way, I was limited to how many projects I could work on and my purchase price was restricted.
Over improving your flip
It is so tempting to spend just a little more on the tile, and the vanities, and the lights. The challenge when you star to spend that extra money is that it all adds up. And just because you choose to spend those extra dollars does not mean that the value will translate on the sale side.
Hiring new contractors without checking references
This is one of the pitfalls that happens all too often. When you are hiring someone make sure to get referrals. Not just photos and their word for it. Names and phone numbers are a must. It may take a little extra time to contact the referrals, but can save you the headache down the road.
Not having a calendar for your flip
Renovations require many people. Different trades need to have access to the house at different times and there’s a definite sequence of how to do things efficiently. Things come up you won’t expect. Not necessarily big things but an inspector being out on vacation or some extra wiring that the electricians forgot to add which pushes back your inspection and your insulation. If you don’t keep track of all these small changes suddenly you’ll find yourself 30 days past when you thought you’d be done with no clear completion date. Put a calendar together and change it as needed. Then make sure everyone knows when the project is expected to be complete. That way they can schedule and work accordingly.
Cutting corners at the end
Every project should have a final walk through and blue tape session before final payment is made. Take the time to walk the house and tape any areas that need touch up. Be detailed, as if you were a buyer, to make sure the finished product looks its best.
Also, cleaning, staging and professional photos are on my “must” list. Include these items in your budget from the beginning so you’re not tempted to skip them. They make a difference in sale price and buyer interest.
Pitfalls of DIY’ing
People tend to overestimate their ability and underestimate the time and expense things can take. Especially when you are trying to fit them in around the schedule of other things happening. Add in the likelihood that you probably have other time commitments maybe with a job or family activities, and it can cost you time which is key when you are flipping.
Another perspective is the quality of your diy may be okay in your home but many times it doesn’t meet the standard of a buyer who’s wanting to buy a professionally renovated house.
And if you end up having to hire someone professionally to do it, that’s a lot of extra time, expense you could have saved yourself from the beginning.
Letting opinions of other people affect your plans
I didn’t tell many of my family members for 6 years that I was flipping houses. They are great people but some of them would have immediately gone to the negative “what if’s”. I am here to tell you that I have worked through every one of those scenarios in my own head so I’m not oblivious. I am, however, willing to do the work and create a plan B so that I am comfortable with my decisions. And for me, this works. I know its not for everyone and thats okay. Just don’t let someone else decide your path.
This list is based upon 12+ years of experience. Some of these lessons I’ve learned the hard way and some are things that I know to have played a part in the good outcomes I have had as compared to some other house flippers. There’s a quote that success leaves clues so I am going with the odds. Things that I have done and things that I have seen others who are successful do as well. And no matter what, don’t compare your beginning to someone else’s middle. Just start. You can’t get better and progress without starting first.
Want to buy a property and renovate it?
Looking to buy a house to renovate? Check out the fixer upper checklist to help you find the perfect house.
For more inspiration for home renovations, follow me on Pinterest @thresholdhomesmn
