Fix and flipping is an exciting, engaging, and potentially risky market to work within. For as exciting and rewarding a successful flip can be, every venture into the investment strategy can play host to a myriad of budget pitfalls that can be challenging to predict. While many industry professionals have developed reliable strategies for avoiding said setbacks, many fix and flippers can still be blindsided by costly needs in their buildouts; consider the following three tips for avoiding budget pitfalls in your future fix and flips.
- Invest the time and potential money in getting an inspection. While the housing market can move incredibly fast, nothing derails a flip like unforeseen foundational damage or structural flaws in a house to be flipped. On top of detecting potentially project-ruining issues, inspections can also highlight low-stress fixes that can drastically boost the value of your flip. Inspectors are trained to find the needs of the house which the untrained eye is likely to miss; mold, wood rot, failing structural components, etc. While the process can slow down your initial investment, it can also save you from investing in a property which was destined to go over budget.
- Don’t over-build during your flip. The importance of beautifying a flip shouldn’t be lost, but focusing more on the “bones” of the property will likely save you project costs without too-heavily affecting your listing price. Money homebuyers are willing to do a little extra work to make the space theirs after they purchase the home from you, meaning that splurging on the crown molding and heated bathroom floors is likely not in your best budget interests, but replacing the heating and cooling systems is. Remember that you’re building to sell, not building your dream house with each flip.
- Work with contractors whom you trust. While building a relationship with contractors is a process performed over time, it is key in avoiding surprise costs in your fix and flips. If you’re new to the industry, ask other fix and flip venturists in your area with whom they work and trust. For work that you can’t perform in the house to be flipped, having a reliable team of construction experts helps assure a high quality of work will be performed within the timeframe and budget agreed upon at the beginning of the contract.
Have a Strategy and Stick To It
Having strategies ready to avoid budget pitfalls through your fix and flips can help avoid tragedies in the ventures, but sometimes a build simply falls apart. Always have an exit strategy prepared just in case a pitfall is inevitable and too steep to make the project profitable. This exit strategy can entail stopping your project all at once and selling to another investor who may be more fit to handle the situation, redirecting your build out strategy, or other forms of resetting – it is just important to be aware that not all projects come to fruition and sometimes taking a slight loss on your initial investment. As hard as losing a project can be, it will only prove to make you more prepared for the next.
To discuss private financing of your next fix and flip project please contact us by calling toll free 1-833-56EMCAP, or visit our website at https://emcaplending.wpengine.com.