If you own a TV and watch it regularly enough, you’re bound to come across at least one or two shows about flipping a house for profit. These shows can make it look really easy, but of course there is a lot you need to know before you try to flip a house successfully. If you’re not careful, your flip can turn into a flop and cost you thousands of dollars. Your success really hinges on a few key decisions that you must make throughout the house flipping process. The more you know upfront, the better off you will be when flipping a house, so take the time to learn a thing or two from the pros.
Here are four common mistakes people make when flipping a house and how to avoid them:
#1: Hiring the Wrong Contractor
Just as choosing the right agent is the foundation to a successful home sale or purchase, hiring the right contractor is the foundation to flipping a house successfully. Your contractor will ultimately be your go-to person for day-to-day details regarding the renovations. If you hire the wrong contractor, you put your whole project at risk. Most failed flippers can agree that they hired the wrong contractor for the job, and that it was one of the key factors that led to their misfortune. Avoid this mistake when flipping a house by doing your due diligence to vet and research all potential contractors before choosing one. Don’t be afraid to treat it like a job interview because the contractor will ultimately be working for you and you need to hire the right contractor for you to be successful.
#2: Not Staging the Home
As we’ve said time and time again, the average home buyer doesn’t have the best imagination when it comes to picturing themselves living in a home — unless you stage each room appropriately. When you’re flipping a house, you need to maximize the property’s strengths and staging can help you do it in a way a potential buyer will appreciate. A beautifully renovated home will just be an empty shell without proper staging. The National Association of Realtor found that staged properties spent 73 percent less time on the market and sell for 17 percent more money than homes that aren’t staged. The money you spend to stage your fixer-upper is an investment that will pay off when you start receiving offers on the home!
#3: Choosing Negative Return Renovations
When you’re flipping a home, it’s important to focus on investing in renovations that will yield the highest returns. A common mistake people make when flipping a house is getting carried away with excessive spending on things that are costly and lacking in After Repair Value (ARV). For example, spending lots of time and money on a pool, basement, or guest bedroom would be a negative return renovation because you would have to invest more money than the renovations are worth to the average buyer. Bathrooms and kitchens are the best areas of the home to splurge on because buyers highly value these parts of the home. When in doubt, look at the comparables — similar recently sold properties in the same location — for guidance on what sells.
#4: Falling in Love With the Home
Finally, the last thing you want to do is fall in love with the home you just flipped. If you were planning to live in the home all along and flip the home for your own pleasure, you can love the home all you want! However, if your point was to flip it for profit, you need to take your emotions out of the equation to be successful. There is nothing wrong with feeling a sense of pride after completing a flip, but you can’t let your bias sway your expectations for how much the home is worth to a buyer. The goal is to make money on this flip, so holding onto a home out of emotional attachment will only eat away at your earnings.
The Bottom Line
The bottom line is that in order to be successful flipping a house, you will need to hire the right contractor, strategically stage the home, focus on renovations with the highest ARV, and keep your emotions out of play. If you avoid the four common house flipping mistakes above, you will be on the right track to success. Contact the Keri Shull Team for more expert recommendations about real estate. We’d love to hear from you!