Our belief is that the more you are prepared for many different scenarios and outcomes in your fix and flip business, the better you are able to deal with anything that might happen. Here are some common mistakes that you can plan to avoid, so your next flip and flip project is not a fix and flop! Here are the top reasons fix and flip projects fail.
Underestimating rehab costs
Make a realistic budget and stick to it. The key is to make your budget realistic. If you underestimate how much your repairs are going to cost you, your project is over-budget before you even walk in the front door.
Doing everything yourself
Trying to do things yourself sounds great on paper. You’re not paying the contractor’s daily rate and you may have some general idea of what the project entails. However, unfamiliarity with a project or technique can mean it takes up much more of your time than you expect. Trying to do big jobs yourself that you have to buy expensive new tools for and potentially fix your mistakes might make it not pencil out. Be clear about what you are willing to tackle yourself based on your time commitment, your available tools, your skill and your timeline. Hiring a professional may be the key to success.
Over improving your properties
Many people who are new to fix-and-flip properties, or the real estate market in general, overestimate how much improvements they need to do to their homes. Often, people do not understand which improvements actually add value, so they do too much. Not understanding how a certain improvement alters the value, and trying to do too many improvements can leave you spending more than you should have. Keep your focus on your return on investment–some things add to that and some don’t.
Buying the wrong house
Or, buying a too-expensive house. Paying too much, not pricing it properly, or buying a home that buyers aren’t interested in is a fast way for a project to fail. Understand the numbers in your market and stick to your plan.Have patience and don’t purchase a home out of frustration or just because you’re trying to get a deal.
Not having a contingency plan
Understand that things will go wrong. You need to be prepared for these unforeseen situations. There should be some room in your budget for delays, unforeseen replacements, and hiring people you didn’t expect to have to. Pad your budget with 10 to 20% extra above and beyond what you are realistically expecting to spend, just in case. If you don’t use, it’s there for you later. If you do, then you planned well and had what you needed to make it happen. There will always be costs that you are not expecting. Without a contingency plan, your project might come to a halt.
If you have questions about your fix and flip business, get in touch with us! It’s what we do, and we’re happy to be a part of your team.