Common Mistakes while Flipping Houses
Flipping houses is an exciting venture that can make you a bundle. However, if you aren’t careful, it can also cost you. Here are some hot tips to keep your expenses low and profit high.
- Trust your Realtor- After repair value can only be assessed by local realtor, not by online tools. Trying to determine the After Repair Value of a home without consulting a realtor is impossible to do accurately. Although online tools such a Zillow may be a convenient place to begin your research, be sure to consult with a professional local realtor in order to accurately predict how much value can realistically be added.
Working with a local realtor also has the advantage of saving you time, which is key in a competitive real estate market. The longer you hold onto a property the greater the chance that the property’s value fluctuates from the original ARV, which increases the riskiness of your project.
2. Going it alone-While it may be possible to flip a house yourself, working with a team will allow you to leverage the experience of others, shortening your learning curve and allowing you to avoid major problems. Your team should include a real estate attorney, an accountant, an insurance agent, real estate agents and contractors.
Although hiring professionals may cost more up front, it can save you a bundle down the line by helping you avoid common pitfalls. For instance, working with a CPA can allow you to keep your taxes as low as possible while staying on the right side of the IRS.
3. Hold on to property for too long-The longer you hold on to a property, the higher your soft costs will be. Soft costs are the costs associated with holding onto the property such as interest on loans and real estate tax. Holding on to a property for too long can cause your soft costs to rise by thousands of dollars. A $100,000 loan financed at 10% will cost you $5000 in interest after six months, $7,500 after 9 months and $10,000 after a year. Electric bills, gas bills, property maintenance, all these expenses accumulate and can add thousands on to your expenses.