If you can afford it, real estate flipping is one of the most lucrative things you can do as a real estate investor.
Flipping a house can yield significant income in a single shot. The average real estate flipping project yields upwards of $67,000 for the investor. In 2022, over 8% of all home sales were house-flipping projects.
Though it may be a lucrative investing project, real estate flipping has challenges. If you've never done it, you'll need to avoid plenty of mistakes, some of which we'll discuss here. Keep reading and we'll tell you 3 of the biggest house-flipping mistakes you need to avoid.
1. Not Budgeting Properly
The goal behind real estate flipping is to take an undesirable property and fix it up to turn a profit. One of the biggest mistakes beginners make is failing to budget for all of the expenses associated with updating a house.
It can be tricky to look beyond the price tag of the home. You may have budgeted for renovations, including materials and labor, but did you account for property taxes or the mortgage payments while you were renovating?
When the home is finally complete, you'll also have marketing and selling costs to deal with. All we're saying is that house flipping comes with a lot of unforeseen expenses, so it's crucial to account for every possible cost before you decide to buy a fixer-upper.
2. Misunderstanding the Market
If you think you're going to purchase a home, fix it up, and sell it with ease, you probably haven't analyzed Atlanta's housing market well enough. There's no guarantee that your home is going to sell right away after you've completed renovations.
When you start looking for a home, the market conditions are just as important as the home itself. If you fix up a home in an undesirable area, it might not yield the return that you're looking for.
In these scenarios, it's best not to overdo your renovations so you don't sink too much money into a hopeless property. Knowing what types of renovations to do with different types of real estate is a skill that every house flipper comes to understand with experience.
3. Overestimating Your Skills
Many first-time home flippers overestimate the skill and expertise updating a house requires. Whether you're strictly a real estate investor or you intend on performing most of the house flipping duties yourself, it's important to understand your limitations.
Overestimating your skills will inevitably lead to more unforeseen expenses. You're going to have to hire professionals to tackle the things you don't know how to do. If you don't budget for this, your investment is going to take on water.
Real Estate Flipping and Property Management
When done with forethought and expertise, real estate flipping is one of the best ways to make money as an investor. The best way to begin is to acknowledge some of the pitfalls investors often face. Now that you're aware of the biggest ones, you can take the steps to avoid them.
If you've just completed a renovation, you may be wondering what to do next. Whether you want to sell your home or turn it into a rental, PMI Atlanta OTP can help. We're a full-service property management and realtor, so contact us to discuss your options for your recently renovated property.
