It is impossible to turn on HGTV these days without seeing a show devoted to flipping houses. While there is a big difference between television and reality, turning a rundown residence into someone’s dream home may be an effective way to turn a profit. The venture is not without risk, though.
In the United States, home flipping has reached an all-time high. Unfortunately, profits for flippers have started to slip. While you cannot control the housing market, you can avoid some of the common pitfalls of flipping. Here are four ways to turn a house flip into a nightmare:
1. Skipping the planning
If you plan to flip a house, you must approach the project as a business venture. While you are not launching a multi-national corporation, you should draft a comprehensive business plan. Skipping the planning process is a good way to lose control of both timing and expenses.
2. Ignoring the market
Before purchasing an investment property, you must analyze the market. After all, to make money with your flip, you need to find a buyer as quickly as possible. If you ignore the housing market, you are asking for trouble.
3. Having insufficient cash
Even though you may be able to acquire a house for cheap, you may need to invest a significant amount in repairs and renovations. Put simply, obtaining a bank loan for a flip may be extremely difficult. Even worse, you may find hidden problems after you begin work on the property. Either way, you should make sure you have sufficient cash for the project before you decide to flip a house.
4. Opting out of property insurance
Fires, storms and other catastrophes happen all the time. While you would never opt out of property insurance for your own home, you may think about rolling the dice on your flip. That, though, is probably a bad idea. If you do not purchase property insurance, you may not be able to recover after a disaster.
There is still money in flipping houses. If you do not know what you are doing, your flip may turn into a nightmare. By understanding the common headaches flippers have, you can likely better plan for a flip that is both successful and profitable.