When taking on a fix-and-flip project, it’s important to be prepared for different scenarios and potential issues that may come up during the process. There are some common mistakes that you can avoid with a little preparedness and planning.
If you underestimate how much a rehab project is going to cost, your fix-and-flip project is over-budget before you even begin. Your budget must be realistic in order to avoid underestimating these costs. Account for all costs and do so realistically.
Taking on Too Much
Being able to do things yourself without hiring outside help is an admirable trait. However, it isn’t always smart in the fix-and-flip business. You may have the general skills needed to work on a rehab project, but unfamiliarity with a specific task or technique may take up much more time, and cost more in the long run, than hiring a contractor to complete these projects. They have the tools and the knowledge to get the job done, and you can focus on the parts of your business that you do best.
Overspending on Improvements
If you’re new to the business, it is easy to overestimate how much you need to do to a fix-and-flip home. It’s important to understand which improvements actually add value to the property. If you aren’t aware of these improvements, you may do too much. This means that you will spend more money and time than is necessary and lower your return on investment. Stay focused on the bigger picture and make the most of your time and budget.
Choosing the Wrong Project
Buying a house that’s too expensive, paying more than a home is worth, or purchasing a house that buyers just aren’t interested in are all ways for a project to fail. Understand your market and stick to the plan you’ve outlined for your fix-and-flip project. Patience is key. Don’t buy a property because you’re tired of waiting or just because it seems like a good deal.
Not Having a Backup Plan
In any business, you have to be prepared for things to go wrong. You need wiggle room in your budget and deadline for the potential need to hire someone or purchase replacement materials. Padding your budget with 10 to 20% more than what you intend to spend is a smart choice. Hopefully you won’t need it, and it will be available for you for future projects. If you do need it, you’ll have it, and the peace of mind that you can take care of an issue immediately.
Get in touch with us if you have questions about your fix-and-flip business – it’s what we do, and we are happy to help!