If you have decided to begin a home-flipping business, you should know that there is a lot to learn about this kind of business. For example, if you do not start with cash in your pocket and you borrow operating funds, you may not be able to flip your first house to make a profit. If you already have plenty of liquid assets to work with, you might be rather flippant with the money you do have. Here is a closer look at some of the common money mistakes greenhorn flippers make, and how to avoid being flippant when you are a flipper.
Do Expensive Amenities Last
You may have tons of cash (or think you do) and want to do all of the really cool expensive ideas first. While buying a fixer-upper home for cheap can cause you to get overly optimistic and motivated, it can also cause you to lose all sensibility. In the home flipping business, repair all structural issues first. These are actually more important to a home buyer than the imported claw foot porcelain tub from France or the multi-floor built-in home vac. After the whole of the house is solid, sound, and ready for extras, then you can examine your budget for this project to see what you have left and what you can do to make it an attractive home to buyers.
Do Not Ignore Home Systems
Do not ignore home systems, such as the electrical, HVAC, plumbing, and water heater. While you do not have to invest a ton of money in these features, it pays to update them and make them sound and functional. By doing so, you ensure that the buyer will not have to worry about doing any of these updates or replacements for several years. If you have to be selective about which items to replace because your budget on this project has decreased, update systems in this order:
- Water heater
That way the electrical demands of the future homeowner are met, regardless of the type of heating and cooling system. Plumbing has a tendency to hold out longer than many other systems, but is not often viewed as more important than heating, cooling, and electrical updates. Water heaters are relatively inexpensive, so the home buyer could manage that if he/she had to later on.
Saving Money for the Next House You Buy
House flippers who have been in the business for years will tell you that if they can squeeze two project houses out of the same budget, they will. That means not going crazy with the money you have on a single house, but saving some of the money to purchase your next project house. You will need to do this until you have six or more homes for sale and all of them sell within a few months of each other. Even then, you will want to be careful about being too extravagant.