Top 5 Mistakes House Flippers Make

We've been flipping houses for many years, and we've learned some valuable (albeit sometimes painful) lessons along the way about what not to do if you want to succeed at buying and selling homes. Here are five of the biggest mistakes I've seen would-be flippers make--mistakes you must avoid in order to reach your own goals.

1. Paying too Much

First, uninformed investors overpay for the house in the first place. Remember, the biggest profits lie in turning a doghouse into a dollhouse, but that means you're going to need to sink some money (sometimes lots of it) into a house to make it shine--and to allow it to make you significant profits. Many pros will tell you that they need to get a house for at least 30% below true market value in order to make a rehab worthwhile. You must know your market and do your own research.


2. Nothing Down?

The second mistake, and one that you often won't hear about in most "nothing down" seminars, books, and tapes, is going into a transaction with a lack of ready cash. Regardless of what many of the so-called nothing down gurus, you're generally going to need to be able to come up with at least a couple mortgage payments during the process. That means you'll be shelling out that amount on top of your regular bills and any that you incur during the remodeling process. If you do spend thousands to go to the "Nothing Down" seminars, you'll find that they really mean "none of your money down" or using credit cards.

3. Under Estimating Repair Costs

The third mistake is underestimating repairs costs. This one can kill your bottom line and turn what you hoped would be dream profits into your worst nightmare.

4. No Cushion for Surprises

You should always include a cushion when estimating repairs, because you'll nearly always run into something you hadn't planned on as you begin your flipping endeavor. It wouldn't even hurt to double the amount of money you think you'll need when doing your initial estimates. That way, if you're way wrong and the repairs aren't nearly that high, you'll be pleasantly surprised by your increased profits.

5. No Exit Strategy

Finally, although it may seem strange, the most disastrous mistake you can make is not to have a realistic exit strategy in place before you even sign the purchase papers. No businessperson would consider buying a product without knowing how much that product will sell on the retail market, and flipping houses is no different. You have to know how much the property will be worth once the work has been done. If you don't know what your sales price will be, it's impossible to know what your potential profits could be. You also should be prepared with a marketing plan to sell and know your action steps.

Flipping houses can be a profitable business, but it's potentially disastrous, as well, if you don't avoid making costly mistakes. What is your business plan?

Learn how to fix with interior design psychology and faux art so you can sell for top dollar. See the Habitat for Humanity house featured on the Flip That House show: Jeanette Fisher's Flip That House with Faux

Pictures of faux flips: Flip That House Book pictures

Copyright © 2007 Jeanette Fisher