3 Most Common Problems That Arise When Flipping a Home
While house flipping can become a great, profitable business with returns in lump sums of cash, flipping a home requires a great deal of attention, hard work, management and also problem solving when it comes to unexpected situations - which is an inevitable experience every flip investor encounters. We want to help save you from trouble, time and money by going over the 4 most common problems that often occur:
1. Underestimating Costs
This happens a lot, especially with newer flippers. They have either done smaller projects before thus feeling confident about their numbers and budgeting or haven’t been educated on these common hurdles of flipping. However, when it comes to bigger projects where small details could cost them, they find it surprising, and some even have to give up while in the middle of a project and sell it.
The solution for this problem is that before making a deal offer, make sure you have a detailed work scope of what needs to be done (*bring a contractor with you to the showing), and some flexible capabilities to handle unforeseen situations.
2. Not Enough Time
Similar to underestimating costs, flippers often find out that they’re probably not going to finish the project in a timely schedule as expected. It could be due to many reasons. Some of the most common ones are not having enough contractors, bad weather, low supply and a tight budget.
No matter what the reason is, a good flipper would predict these adverse situations, thus preparing themselves with a plan from the beginning. Having multiple plans will mitigate some loss for flippers.
3. Market Trend Shifts
Being in the real estate market for a while, we noticed that a lot of people try to bid really high for a fixer upper property thinking that they can easily turn it into a better house and sell at the top of the market as demand is all time high. Then, while working on the project, interest rates started increasing exponentially, therefore, demand is down. His after repair value of the property now became only 70% of what he thought it would be, thus, taking a loss on this flipping deal.
The lesson here is that flippers also need to be a macro-economic observer as well. Don’t just go straight to the project without thinking about how the market will behave. It’s not easy to predict the future, but normally, the FED and government often give hints before they actually execute a plan, so follow news and make judgments before it’s too late.
Keep a strong knowledgeable team around you and can weather the storm!