10 Mistakes Most New Investors Make When Investing in Fix-and-Flips
For seasoned investors, fix-and-flip approach projects can be lucrative. If you are a new investor or exploring the best fix and flip loans industry in Denver, be mindful to not do these 10 common fix-and-flip mistakes below.
1. Not Researching Your Market
Carrying out market research where you plan to invest will help you understand the area. Besides learning more about the market, it gives you an idea of the risk involved when investing.
2. Neglecting to Structure Your Budget
Learn how to plan and adhere to your budget. If the property is out of your budget, don’t buy it. Do not go into a fix-and-flip project that will take almost all your finances.
If you cannot make payments because of over-leveraging, it can lead to foreclosure. Never borrow more than you need for a real estate purchase. Take advantage of leverage for your own sake.
4. Not Buying Property Insurance
In the event of unexpected problems such as floods or theft, property insurance pays the investor. Fix-and-flips are inherently risky; hence it is important to do whatever it takes to protect your investment.
5. Excessive Renovations
One common mistake among first-time flippers is over-renovating. The overall aim of property fixing is to attract buyers and make a profit. Conduct a cost analysis before you blindly start investing.
6. Not Vetting Contractors Carefully
An investor must spend more time in the contractor screening process. Check the contractor’s past jobs, validate their licenses, and ask their references. Since you are investing a lot of money into their skill set, do all you can to keep the property safe.
7. Overlooking the Nearest Houses
The neighboring properties will make or break your investment’s desirability to potential homeowners. Analyze the local market, get to know the neighborhood, and don’t ignore the homes around the property before finalizing your purchases.
8. Forgetting the 70 Percent Rule
The 70 percent notes you do not have to buy a property above your after-repair-value (ARV) by multiplying the ARV by 0.7 and subtract the repair cost from the answer. It’s not necessarily the standard that most seasoned investors obey, but we recommend not to ignore it because it often avoids overpayment.
9. Not Planning Your Timeline
Timing is of the essence for an investor. Take the time first to come up with an efficient strategy and timeline to complete all the flipping phases such as finding houses, closing, renovation, inspection, and listing.
10. Having No Exit Strategy
Determining your price point when you list the property at the earliest opportunity is crucial for your exit strategy. Talk with an experienced real estate agent to get a fair price for sale.
Contact Pine tree Financial Group today if you’re ready to take on your first fix-and-flip project. We provide guidance and quick processing so you can start getting to work on your fix-and-flip.