5 Mistakes that will Kill your Fix and Flip
1. Taking Too Much Time
The best way to avoid this probelm is to create a timeline for your project, and stick to it. The timeline should go hand in hand with your project budget and include all phases of the project: from the time you buy the property to the time that you sell it. Then you need to revisit the timeline and make adjustments. More than likely you will have problem with your time, but you will learn by your mistakes.
Avoid the urge to figure it out as you go.. Make the timeline anyway, and keep making adjustments when things come up. The timeline will hold you on course and, along with your budget, will stop the project from getting too far off goal.
2. Not Having/Sticking to a Realistic Budget
Also with your timeline you'll want to set up a budget and stay with it. Seems logical, but this is another killer in regards to any Fix and Flip.
There are two ways that your fix and flip can fall apart due to the budget. Here they are and how to avoid them:
Budget doesn’t cover everything: You want to make sure your project budget covers all the costs you will incur. This of course includes all improvements you plan to make, so be sure that all activity in the house has a line item (from demolition to final cleaning).
Also, make sure that the “soft costs” are included. These would be things like loan interest, taxes, utilities, permits, architect fees, etc.
Budget is unrealistic: If you plan on replacing the roof on your flip, be sure to budget more than $100 for it. I am being a bit extreme, of course, but I am trying to make a point. You need to make sure that the line item expenses in your budget are achievable given what you know about the property going in.
3. Over-Improving the Property
It’s hard to know when to stop improving on a fix and flip, especially if you have the resources. There are things that really make a fix and flip pop, like granite countertops, crown molding, tile, hard wood floors, landscaping, and the list can go on. Every house should have a few things that make people say, “WOW!” when they walk through your property. These things make your house stand out and will help you sell quickly.
More importantly you need to only improve the property with the market. If you are in an area that doesn't support Granite Counter tops, you may only need to put in Formica.
4. Not Preparing for Unforeseen Issues
This is by far my least favorite part of fix and flips. As I said before, there are just too many variables in a fix and flip to anticipate all of them. You just can’t know everything. If you budget a fixed % of unseen variables you may make it thru.
5. Over-Pricing the Property
An overpriced house will not get the attention it deserves when it first goes out for sale. The first time a house is listed is when it’s on most people’s radars. If you are priced right, you should be getting interested buyers as soon as it gets listed. For a variety of reasons, you want your house to go under contract within a few weeks of getting listed. The obvious reason is that you want to sell and get your hard earned profits. The second reason is that you don’t want it to sit on the market.
Good luck with your Fix and Flips
Please call me when you are ready to try one of these and I will get you started.
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