A property investment is almost always lucrative. With land prices skyrocketing every year, if you have enough capital to spare, this will always be a good investment. However, money alone won’t be enough to help you if you commit several mistakes when it comes to house flipping. No business is guaranteed and it’s really up to you to deal with situations that may arise from your investments.
But as they say, prevention is definitely better than finding a cure. So if you want to make sure that your house flipping business succeeds, read on to find out how you can avoid common house flipping mistakes.
Choose the Right Location
For any property business, location is everything. In fact, it’s important for any business. So you should be aware of the best places to invest your money in, preferably a place where people would want to live.
Remember, your property will only become profitable if someone desires to live there. Meaning, if you are in the business of flipping houses, you want residents to want to live in your home. And no matter how much you upgrade it, if the house itself is in the middle of nowhere, then you will likely get nowhere.
An important thing to consider when choosing the right location is the availability of basic necessities like schools, markets, and churches. There’s also the issue of susceptibility to natural disasters. Hurricanes and earthquakes are something to think about. Not only will you lose your income if no one lives in your place, but you may also lose the house itself if it gets caught up in a violent storm.
Make a Business Plan
After choosing the perfect, or at least the best location for house flipping, then it’s time to make a plan. You don’t want to just fix the house up and offer it to the highest bidder. Remember, to make this business successful you must document everything you do so you can replicate the good practices and eliminate those that are not.
Making a business plan also means you have taken into consideration every requirement for your business. This includes all building permits, business registration, and tax requirements.
The 70% Rule
Now, when it comes to money matters, you have to be systematic in your approach as to how much you’re going to pay for a fixer-upper. This is where the 70% rule can come in handy. The 70% rule means that you should not pay more than 70% of the property’s price after repairing. This will ensure that you will have enough profit when the time comes for you to sell the repaired home.
Bear in mind that the 70% rule is not set in stone. It should, of course, not be followed blindly for every single circumstance. But it should be something you keep in mind before going on a spending spree for every fixer-upper house you find on sale.
Be Your Own Contractor
Becoming your own contractor means you don’t need to worry about encountering a bad one. We have all heard horror stories from veteran house flippers who flipped out after dealing with a bad contractor. Some even had to close their business because they ended up losing a lot of money after dealing with such builders.
To prevent this from happening to you, you might want to consider becoming a contractor by studying for a license in New Mexico or anywhere you want to start your house flipping business.
While it sounds like you have a lot more to worry about by becoming a contractor, it also means that you can be sure the best possible materials and work are put into your house rehabilitation. Plus, you don’t have to be the one to actually get a license. It may be your spouse or perhaps a business partner who can devote time and attention to be your exclusive contractor.
There you have it. By religiously following these steps, you can minimize issues and avoid delays in getting the sweet profits of becoming a house flipper. Just keep in mind that mistakes are unavoidable but they are manageable only through preparation, patience, and persistence to stay in the game.
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