1. Not having enough capital.
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There are 3 major items to consider when it comes to the money required to flip a house successfully. First off, you have the acquisition capital: this can be a cash purchase or just a down payment and closing costs. The second category is the capital required to renovate and update the house, while the third is the carrying costs associated with the project. Most people fail to understand just how many variables are involved with a rehab budget and carrying costs. For people who are new to the business I would advise you to expect at least 2 or 3 times capital requirements for fixing and holding the property.
2. Unreasonable timeframes.
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We all have seen other TV shows on the air that bring in an army and build a house from the ground up in 5 days. In the real world it is very different. It's often impossible to get a licensed plumber or electrician to even show up 5 days after he told you he would already have the job done! Just recently we flipped a house in a different county then we usually buy in and the city approval alone was 6 weeks. Mike and I consider a quick rehab as a property that requires 3 weeks or less. Larger projects often take 8 weeks and properties that are gutted down to the studs can easily take 10 to 12 weeks to complete. The key is to give your project a reasonable goal for completion.
3. Over improving.
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Many new investors fix the house as if they were going to live in the property themselves. They pick the kitchen they would want, the layout they would want, and expensive finishing materials. You need to learn to cater to your market and understand who your buyer is. The best way to understand your competition is to tour 3 or 4 homes in the neighborhood that are similar in size and price. You just have to be more appealing and similar-priced than those homes. Do your homework and rehab the house accordingly. Strive for the champagne look on a beer budget.
4. Letting buyers see your house before it's ready.
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Every day I see people putting For Sale signs in the ground before a property is ready to show. Most investors are eager to get the property on the market and they are hoping for offers to start pouring in even though they are only three quarters done with the project. Don't fall for this mistake. You have one chance to make a first impression so make sure your house is show room ready. Walk through your own house 5 different times and encourage others to do it with you to look for any imperfections or issues a buyer might raise. When there are no more issues (no matter how tiny to resolve), then put the house on the market and you will be surprised how you will set yourself apart from the competition.
Got questions? Check out the Flip Men page or follow up with Mike and Doug directly on Twitter @Demo_Doug @FlipManMike and by using #FlipMen. Don't forget to tune in to the season premiere of Flip Men with back-to-back new episodes on August 5 at 10/9c.