How do you earn mega-bucks flipping houses? You line up your financing, plan in advance, build a solid support network, over-estimate costs, under-estimate profits, work hard, and with a little luck and a lot of sticktoitism, you'll probably earn a good profit. Is is that easy?
Here are ten sure-fire ways to fail at flipping houses:
Convince yourself that it's too hard. Flipping houses is difficult, time-consuming, and risky, but it's not impossible. If you talk yourself out of it before you even try, your flip has already flopped. Pursue your dreams, plan well, stick to it, and you're very likely to succeed. Convince yourself that it's easy. If you start flipping houses thinking that you just hopped aboard the gravy train, you're going to be very disappointed. Any venture in which you can potentially earn a high profit requires hard work and sticktoitism and carries some risk. Speculate on the housing market. Assuming that housing values are going to rise ten percent annually is likely to lead you into offering too much for a house. Make sure the house you buy today is one that you can sell tomorrow for 20 percent or more than your total investment in the property. Get emotional. When you buy a home to live in, it's okay to get a little emotional and perhaps pay a little more. When investing, deciding which house to purchase and how much to pay is purely a business decision. Make the offer with your head, not your heart. Transform a shack into the Taj Mahal. In your zest to maximize the future sales price of a home, you can often invest too much, essentially investing your way out of a profit. Invest only enough in a house to bring its price in line with similar houses in the area. Low-ball estimates for repairs and renovations. Home repairs and renovations are expensive. Calculate realistic estimates and then add 20 percent to the total to give yourself a buffer for cost overruns. Skip the inspection. Buying a house before inspecting its records and seeing the house with your own two eyes exposes you to significantly more risk. Always know what you're buying, especially when purchasing a house in foreclosure. Over-estimate the future sales price. Relying on wishful thinking is a sure way to end up with a low- or no-profit investment. To estimate a realistic sales price, check the prices of similar homes in the same area that have recently sold. Hide problems to save money. Doing shoddy work or simply “painting over” or “carpeting over” problems will ruin your reputation in the long run. Don't over-improve a home, but don't do shoddy work or attempt to hide defects or deficiencies in the property. Get in over your head. Buying three or four properties at a time is a bad idea when first starting out. Start slow with one relatively inexpensive property, and work on doing the best job you can. Mistakes on low-cost properties cost less. After you've successfully flipped one house, move up to something that's a little more challenging, risky, and profitable. When you're fairly confident that you can profitably flip one property at a time, you may be ready to take on two at a time.
Remember that anything in life that's worth doing is at least a little risky and requires hard work and determination. I always tell investors to flip two or three houses before giving up. Even though I've been flipping houses for over 30 years, I still have an occasional flop. I cut my losses the best I can and move on to the next house. Follow my lead, and read Flipping Houses For Dummies so you start out on the right foot.
