House flipping is back – or more accurately, it never really left. After the 2008 debacle most investors will agree that the fix and flip market had definitely cooled. Now, however, with conditions once again right for flipping in real estate markets throughout the Washington D.C. area, including Maryland and Virginia, investors are once again enjoying prime conditions for house flipping. Adding more pressure to this opportunity is the potential for additional interest rate hikes, making time critical.
But even with good prospects, the caution flag is still flying in the house flipping arena, and those who earn the most profit from today's fix and flip market will be those who avoid making the following mistakes:
1. Failure to Know the Current Market
Failure to learn current market prices and understand which areas of the east coast region are ripe for this type of investment is a critical mistake. Investors who want to take advantage of hot spots like the Virginia Beach and Richmond areas, are willing to spend the time necessary to research the market and plan on how to proceed.
2. Ignoring the Trends
A very costly, but common mistake often made by newer investors is to renovate the homes they are flipping to their own tastes, while ignoring buying trends in the area where the home is located. For instance, if statistics show that buyers who are looking are placing bedroom space at the top of their list, an investor who decides to turn one the home's bedrooms into a lavish walk-in closet has probably just alienated most of the buyers in the area. To make sure this does not happen, research local buying trend information and use it to make design and renovation decisions for each home.
3. Buying Homes With Costly Problems Outside Budget Parameters
Another big mistake that can ruin any chance for making a profit is to move ahead with buying a home with damage beyond your budget or capability to repair. Examples of this include major structural issues, or homes that are so poorly designed that they will not be appealing to buyers even after renovations. Instead, choose homes that have been thoroughly evaluated so that you can be sure the project will finish within both the time frame and budget allotted for it.
4. Not Abiding by Permitting and Zoning Laws
There is no good reason to choose not to follow existing permitting and zoning laws. This behavior is likely to result in a significant loss of time and money.
5. Agreeing to Work With the Wrong Contractors
Your contractor can be the difference in keeping your fix and flip from being a flop. If you don't currently work with contractors who share your work ethic, seek out referrals from other investors, real estate professionals, and lenders in the area and make sure that each is honest, hardworking, properly certified, and insured before bringing them on board.
6. Failing to Develop a Solid Budget and Funding Plan for Each Fix and Flip Investment
Before making any offer for a home, successful investors will always make sure they have a solid budget, backed up with reliable funding sources, such as hard money lenders.
Researching information for budgeting is much easier than every before, thanks to the internet and its wealth of information, there really is no excuse for even the newest investor not to make good budgeting a part of their fix and flip strategy from day one!