Insula Capital Group

Two workers fixing the exterior of the building

Top 4 Mistakes When Flipping a House

The house flipping business is rife with costly errors every step of the way, which is why every experienced flipper knows to lead with a business plan. By doing so, they can estimate the costs of things like utilities, property taxes, etc., at every step.

Here are some common fix and flip mistakes investors make.

1. Buying an Overpriced Fixer-Upper

It’s important to get off to a good start with your fixer-upper. In the context of flipping, this means not getting a property for more than 70% of its After-Repair Value (ARV), excluding the projected repair costs.

Abiding by the 70% rule from the onset means you’ll have enough to make up for the repair costs, plus any unexpected expenses and delays, and make a sizable return on investment.

2. Not Coming Up with a Budget

You can’t come up with a business plan unless you have a budget set out. A budget accounts for the following:

  • The price of your property.
  • Whether to pay for said property upfront or take out a mortgage.
  • Property taxes, insurance, and other expenses that come with the territory.
  • Repair costs
  • Renovation duration
  • The time it’ll take to sell.
  • Maintenance costs during said time.

Since the above expenses sound daunting, most experienced real estate investors gear up to foot the bill by laying it out on a spreadsheet before applying for a hard money loan.

 A Kitchen with Marble Countertops and White Furniture Undergoing Renovation

3. Forgoing a Pre-Sale Inspection

A pre-sale inspection doesn’t come after improvements, nor is it something you do a day before the start of your renovation. It’s something you get in before setting a budget and business plan.

For all you know, the inspection team may find serious structural problems and infestations threatening to eat the budget you’ve set out. Similarly, a post-renovation inspection may very well lead to unpleasant and expensive surprises.

4. Rushing the Listing

While this may sound like a rookie mistake, you’d be surprised how many investors jump the gun on listing a property even when it’s still undergoing a remodel. To avoid falling into the same trap, try to see the property from a buyer’s perspective.

You might have a finished version in your mind, but the buyer wouldn’t be so imaginative. They’ll want to see the finished product, and if you fail to give it to them, they’ll move on to some other property. This will increase the time your property stays on the market, meaning more expenses for listing and property maintenance.

Got Your Business Plan Down? Seek a Private Money Loan in New York

Apply for flip loan financing at Insula Capital Group for the best hard money lending rates and terms, not to mention a quick and easy approval process to help you close on your fixer-upper in no time at all.

Get in touch with our fix and flip lenders today.