Tuesday, February 16, 2021 / by Tori Tarver Watts
1) Lacking a Backup Exit Strategy
Markets change. You need to think of a backup strategy when flipping a property. Could you live in this home if the market dips? Could you rent it out and have enough cash flow to make a profit? Another great option if your local government allows it is turning the property into an Airbnb. These backup plans may not be necessary especially in Utah where the real estate market has been strong even through the COVID-19 pandemic, but it is never a bad idea to keep your options open just in case. Again, there is a small chance that you’ll need to fall back on these options, but if you think it would be difficult to rent out, illegal to Airbnb, and you wouldn’t want to move in yourself then you might want to think twice before jumping into something that might put you in a bad financial position.2) Buying Too High
This seems too obvious, but many times buyers are so captured by the flips that they see on HGTV that they think it is easy. If you have small margins because you bought too high, then your flip will likely flop. Don’t jump at the first flip you see. They can be difficult to find, but if you are so desperate to buy a flip, you’re likely going to get yourself into a situation where you spend too much on the home. Finding a profitable flip can take time, so be patient, but equally ready to strike when the deal is hot.If you have to break out the calculator to determine if it will be a good flip then proceed with caution. 3) Disregarding Potential Buyers
If you forget who you are targeting the flipped home towards then you might miss out on potential buyers when the home is completed. If you are flipping a home in a middle-class neighborhood, you’ll want to be careful that you don’t flip the house into something opulent, and out of the price range of many who live in that community. Of course, you want to make the home more valuable, but if you turn a bungalow into a McMansion you aren’t going to see great returns, or any, off of your investment. Recognizing who the potential buyers are in a neighborhood is important because you don’t want to renovate a house and turn it into something no one in that area of town is interested in. 4) Making Emotional Decisions, NOT Financial Decisions
If you purchased a fixer-upper simply to make a profit, then it is ill-advised to fall in love with the property. Remember, this property is an asset, and you cannot forget that. If you start making decisions that aren’t financial ones, then it can be really easy to turn what would have been a great investment into a nightmare. If you fall in love with the home you might start spending your money on personal touches that don’t necessarily add value to the home but are simply personal preferences.