Common Mistakes Made When Flipping Property
The concept of purchasing investment property with the intent of renovating it and selling for a profit has become incredibly popular in recent years.
With house prices continuing to reach record highs due to high demand and relatively low supply, investing in property has been a somewhat fruitful decision for people who have an eye for value and the potential rewards can be particularly lucrative.
However, with big reward comes big risks, and with that in mind here are some common, costly mistakes made by beginner house flippers who do not seek out professional advice.
Buying property is expensive, and investing in property requires either some substantial startup capital or the willingness to take a risk with financing the property that you plan to flip.
Financing requires interest to be paid on repayments, which will eat into the potential profits of a flip, and when you add renovation costs, insurance, taxes, fees and stamp duty to this interest, it requires a greater sale price to break even.
Most mortgages will not be available for house flipping, so you will be taking out short-term high-interest buy-to-sell mortgages and bridging loans instead.
The best results, therefore, will involve property that due to circumstances is available for much
lower than its market value, such as property that has been repossessed or sold at auction.
As well as this, renovations can be more expensive than you may expect, especially if you need to hire skilled professionals to help with the flip.
The biggest and most expensive mistake is to neglect the potential costs and end up needing to sell the property for more to make money.
Not Knowing Your Market
Successful property flipping is about having a great sense of the right price for the right property based in the right location to make money.
Sometimes what appears to be a bargain may end up not being an area that it is easy to sell into for the desired price.
As well as this, know what people buying in that market want, and choose your renovations carefully.
House flipping takes a long time between finding the right house, making the right renovations and finding the right buyer.
Property can sometimes take a while to sell, so make sure to factor that into your budgeting and financing options.