These days, house flipping is a popular concept. There are entire TV shows devoted to it. It may even be something you’ve thought about doing yourself.
The premise is simple: You buy a home that might not be in the best condition. Because of its state of disrepair, you get it for a good deal. You spend a few weeks fixing the place up, slapping on a new coat of paint – literally or figuratively – then quickly list and get the place sold. You should walk away with a tidy little profit.
Yes, on paper, it’s pretty simple. But in practice, there are a number of reasons why your house flip can go wrong.
Here are five house flipping mistakes to avoid that could derail your investment:
- Not having enough money.
- Not having a business plan.
- Not having property insurance.
- Not understanding the market.
- Overpricing your listing.
Not Having Enough Money
You’ve probably heard the old expression about how you need to spend money to make money.
Well, that’s certainly true in house flipping. Before you can realize a profit, you’ve got to sink a little money into fixing the place up – making repairs, adding new fixtures, replacing appliances and more. How much exactly all of this could cost depends on the upgrades you are willing to make and the materials you want to use. For example, if you want to replace the countertops in the kitchen, the difference between choosing marble or granite can make a big difference.
But what happens if you buy a house that’s in disrepair, and then realize you don’t have the resources you need to fix it up? That can wreck all your plans for a successful house flip. Always make sure you’ve got some cash on hand before you invest in a house flip property.
Not Having a Business Plan
House flipping isn’t just about getting the place sold. It’s about getting the margins right. It requires you to not overpay on the front end; to stay on time and on budget as you make repairs; to list and sell expediently; and to get a certain sale price.
If any of those components are out of place, you may end up losing money on your house flip. That’s what makes it so necessary to have a business plan where you lay everything out in advance – and maybe leave yourself a little room for error.
A business plan could include:
- A list of all the repairs you want to make.
- A list of prices for everything you want to replace so you can stay on budget.
- A schedule to make sure you are spending the right amount of time on certain projects.
[Read: The Guide to Selling Your Home]
Not Having Property Insurance
One of the top house selling tips for flippers: Get insured.
Yes, really. Property insurance isn’t just for your residential property. It can also help you protect your house flip against fire, flood or items and materials lost to theft.
Yes, it’s going to eat into your margins just a little. But imagine the alternative – buying an investment property and losing everything in some kind of natural disaster. Insurance can make that a non-issue.
Not Understanding the Market
A successful house flip isn’t just about the property; it’s about the market itself.
Simply put, you can get a great deal on your initial investment, you can spruce the place up and you can list it for a competitive price. But if the market’s bad, you may still have a hard time selling.
Intimate knowledge of your local real estate market is essential to any successful flip. Look at the comparable home sales in the neighborhood. How much are houses with similar floor plans and square footage listing for? How are neighboring houses that have been listed doing? Have they gotten any offers or has the home selling process been really slow? Have those offers been below asking price, and by how much? How long have neighboring houses been on the market? These are all helpful questions to ask yourself before purchasing a home you have the intention of flipping.
Overpricing Your Listing
When it comes to how to sell a house, pricing is always key. And that’s very much the case when you’re flipping.
If you undervalue it, you’re leaving money on the table. And if you overprice it, you won’t get any takers – and the property may just languish on the market. Either way, your investment is in trouble.
Make sure you do your due diligence, checking comps and surveying the market, before you price your home. And by the way, you’ll want to start thinking about pricing before you invest, ensuring it’s actually going to be worth your time.
House flipping can be exciting – and profitable. But that’s only possible when you take care to do it right, avoiding these common errors.
Stock up for your next DIY project.
If you're always finding new home improvement projects to take on, you're not alone. In a 2015 study of 500 do-it-yourselfers by Venveo, a digital marketing agency and parent company of DIYConsumer.com, 58 percent of respondents said they do a DIY project either because it's a simple project or they find the work fun, while another 39 percent said they want to save money. Regardless of your reason for taking on a DIY project, you need to be prepared with the right tools. Read on for tools every DIYer should have to tackle home improvement, maintenance and crafting tasks. We've included a price range for each tool, based on current prices at various home improvement retailers like Home Depot and Lowe's, to help you plan your purchases.The basics
These DIY and maintenance must-haves help set you up for success. They're simple tools that are fairly inexpensive yet key to ensuring your safety, avoiding damage or making mistakes while you work.The internet
Especially if you're new to DIY projects, take advantage of the free resources available online to help you figure out the best way to build something, make a repair or master regular maintenance you've never done before. "The information is the power," says Chris Zeisler, master technician and technical service supervisor for RepairClinic.com, an online marketplace for appliance and repair parts and equipment. Zeisler recommends watching tutorials and informational videos on YouTube or advice sites like RepairClinic.com to get a better understanding of what you need to do. If you're still nervous about the job after watching tutorials, consult a professional.
Cost: Nothing beyond the cost of your Wi-Fi or mobile data plan.Safety glasses
Regardless of skill level, eye protection is a necessary part of any project you take on. Safety glasses are particularly important when doing tasks that can create debris, like sawing, drilling, spraying paint or using a sealant.
Cost: As cheap as $1.50, or you can go all out and get prescription safety glasses, which can put you back a few hundred dollars.Tape measure
The saying goes, "Measure twice, cut once." So naturally, you need to be able to measure when it comes to cutting wood for a bookshelf, framing your artwork or simply figuring out what size couch you need for the living room.
Cost: Less than $10.Level
Keep your home from looking like a college dorm room and use a level to hang any wall decor. A level is also an important tool when building or repairing anything that's supposed to have a flat surface – a DIY nightstand isn't quite as nice if your glass of water keeps sliding off a slanted tabletop.
Cost: Free phone apps are available, or you check out torpedo, beam or laser levels ranging from $4 to $30.Drop cloth
Whether you're painting, sawing, drilling or gluing, keep your floor or driveway from getting damaged by placing a drop cloth beneath your workspace.
Cost: Use an old bedsheet for free, or invest in a canvas or plastic drop cloth for $7 to $10.Wood glue and other adhesives
Wood glue and other adhesives
Plenty of DIY projects and repair scenarios can be strengthened with a little extra sealant. For wood projects, use wood glue to back up screws and nails. When wood isn't the material you're working with, a super glue or all-surface construction adhesive can help get the job done.
Cost: Depending on the type of adhesive, expect to pay $3 to $12.Stud finder
If you're hanging a picture frame or shelf, a stud finder allows you to find the best possible place to anchor a nail or screw – without worrying whether it will fall off the wall later. When you're cutting a hole in the drywall, the same stud finder will help ensure you don't cut through an important part of the structure of your house. Studs in residential buildings are typically wood, but a stud finder using magnetism often still works by locating the nails in the stud. More sophisticated stud finders will detect the differences in density along the wall.
Cost: Depending on type, it will cost between $10 and $50.Ladder
A 12-foot ladder isn't necessary if you're an apartment dweller who relies on the property manager for most maintenance issues, but a short stepladder can always help you reach the top shelf in the kitchen or get a better angle while hanging wall decor. In a house, a taller ladder can come in handy for cleaning out your home's gutters, as well as reaching high-up spots while painting, cleaning or decorating inside.
Cost: Depending on height and stability, a ladder will cost anywhere from $40 to $1,000.Hand tools
You don't need construction experience to use these household tools skillfully. These simple tools are an important part of being able to make small, straightforward repairs at home, whether you live in an apartment, condo or house.Clamp
In DIY scenarios where the wood glue comes in handy, you'll typically want a clamp to help serve as additional security while the adhesive dries. Clamps also help hold wood and other materials together or in place while you're sawing, drilling or sanding and need help keeping the materials steady. You can opt for a simple C-clamp or bar clamp, which will suffice in relatively simple projects.
Cost: Expect to pay between $3 and $20, based on the size and type of clamp.Screwdriver
Securing a dresser to the wall or finally putting that Ikea coffee table together will likely see you reaching for a screwdriver. Screws vary in shape and size, so Zeisler recommends checking out a set of screwdrivers with interchangeable screwheads to keep the number of screwdrivers you own down, while still having access to the Phillips head, flat head, Allen wrench (hexagon), Torx drive (star) or Robertson (square).
Cost: Either invest in a set of screwdrivers with different heads or get a multibit screwdriver, which both run from about $7 to $30.Wrenches and ratchets
Wrenches and ratchets
Whether you're tightening a bolt on your bed frame or building a deck in your backyard, a wrench or ratchet and socket set is a must-have. Like with a screwdriver, Zeisler recommends checking out investing in a set to help reduce the total number of wrenches you need, and ensure you have the tool for every possible scenario. "You can get more than one thing and more than one component," he says. "Instead of having seven or eight combination wrenches, you can get one particular tool that has a combination of all those on one assembly."
Cost: Sets of wrenches with additional adjustability typically cost around $20. Ratchet and socket sets typically start at about $15.Claw hammer
A hammer almost seems too simple a tool to have, but you'll find yourself needing one quite often, whether it's to hang a calendar on the wall, construct a birdhouse or repair siding on your house. A claw hammer is often the recommended go-to for DIY projects because the backside of the tool also allows you to pull out nails as needed.
Cost: Depending on the brand, expect to pay $5 to $40.Pliers
You may need help pulling something apart or holding it in place while you apply an adhesive – and pliers are an effective tool in both cases. Some pliers are specially designed to help cut or strip wire as well, which helps if your project requires some basic electrical work. In such cases, always have the power turned off and call a licensed electrician if you're not sure what you're doing.
Cost: Pliers range from $9 to $40.Utility knife
You could be opening a package you got in the mail or cutting dowel rods that don't quite require a saw, but having a utility knife specifically for home improvement purposes means you don't have to ruin your kitchen knives to complete simple projects.
Cost: Utility knives range from $5 to $45.Handsaw
For a bigger cutting project, have a handsaw ready. This is one tool you want to have your safety glasses on hand for, along with gloves to protect your hands. Before getting started, mark the wood or material you're cutting with a pencil and straightedge to ensure you cut along a straight line.
Cost: Handsaws run between $9 and $25, so there’s no need to break the bank.Power tools
For some projects, you need a bit of additional power behind it. Enter the motorized tool. "If you're going to be in an apartment or condo where it's going to be smaller projects, I don't think power tools are going to come into play," Zeisler says. "But if you’re a homeowner, you've invested in a mortgage [and] you're in the home, you're probably going to want to start getting familiar with some of that."Drill
As you get into more skilled DIY projects, you'll likely need to use a drill to put holes in wood, masonry, plastic or other materials. Different drill bits are used for different scenarios, and most good DIY tutorials will tell you which one to use for setting screws or creating a clean hole. Like with a saw, always use eye protection.
Cost: Cordless power drills run between $50 and $130.Sander
When building a bookshelf or giving your current one a makeover, sanding is a key step before the staining or painting phase. A sander takes a painting or staining project from time-consuming to convenient. Many DIY bloggers recommend a 5-inch orbital sander, as it's relatively easy to handle.
Cost: A sander will likely cost between $40 and $70.Nail gun
When your DIY skills are more advanced, a nail gun might be the tool to help you up your game. Like with a sander, a nail gun makes the time-consuming process of hammering nails happen in a fraction of the time, though it requires a certain level of caution and some more money. There are also different types of nail guns for the project at hand – flooring, roofing and building furniture all use different types of nails, for example. Some of the more sophisticated nail guns require an air compressor, which may come with the tool or need to be purchased separately.
Cost: Expect to pay $80 to $650 or more, depending on the type of nail gun you select.Circular saw
If you're looking to build furniture or upcycle some key pieces, many DIY tutorials call for a circular saw to cut larger amounts of wood. The circular saw is recommended as the more basic option and is less expensive than a table saw – not to mention, it'll take up less room in your garage.
Cost: As low as $39 or as high as $500.Read More
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Haas’ team advises homebuyers and sellers on how to make the most of their experience by connecting them with the optimal agent partner for their needs. With over 10 years of experience in the real estate industry, including previous roles at Zillow and Auction.com, Haas is an expert on the ins and outs of home sales.