Getting ready to fixnflip a house? Maybe employ the BRRRR strategy? Great! Here’s a few tips to avoid along your way.
Buying a money pit
Every house has problems, but if you can, you want to avoid taking on problems that are too big for you to handle.
For your first flip, stick to looking at properties that need mainly cosmetic fixes, and be sure to do a home inspection, which will alert you to most big-ticket fixes before you buy the home.
Avoid foundations issues, mold, and fire damage until you are more seasoned.
Be Honest with Yourself
Sweat equity is a huge part of the profitability of a fixnflip. However, overestimating your own abilities can be more costly in the long run.
Maybe leave plumbing, HVAC, and electrical to the professionals. Making a profit on a flip while working with contractors can be done. You just have to be careful about budgeting and sticking to your estimates.
$80,000 Kitchen in a $150,000 house.
Overspending on renovations is probably the quickest way to lose money on a flip. While you’ll want the work that’s done to be solid, unless you’re in a luxury market, this is the time to forgo high-end, custom finishes in favor of middle-of-the-road choices that hold mass appeal.
Forgetting to add a cushion to your budget
Lastly, even the most carefully planned flip will hold some surprises. Plan for the unexpected by remembering to add a cushion to your budget. Typically, investors plan to spend an additional 10% over the total estimated renovation cost on contingency charges.