Most common 'buy' and 'flip' mistakes
'Buy and Flip' is a phrase to describe the rapid process of purchasing houses at low prices and 'flipping' or selling them off when the market values them at a higher price. This system of investing has risen in popularity in the last two decades, but don't let the carefree catchphrase make you think it's easy.
If anything, to be able to 'buy and flip' successfully, you need to make sure you are making the best decisions, and not taking too long to make them. Remember, the quicker you can sell the property you have invested in is the goal in this game. To leave a property, as you would a regular investment property means you are paying interest and tax on a house you intend to make all your money - and more back on. For every day you let it sit, you're getting further away from your ideal profit margin.
So how do you flip a building or house? Instead of giving you the golden ticket of answers, we've decided to tell you how not to do it. We have decided to explore some of the biggest mistakes people make when they try to 'flip' houses.
Running out of money
One of the biggest mistakes is one of the hardest to avoid. It's expensive business trying to break into the buy and sell market, especially as a full-time hobby or business. Servicing a mortgage is just the beginning of costs to consider. For every dollar, you spend paying interest, remember, it's another dollar you have to make on your sale in order to even break even.
There's also the cost of renovations and making decisions which will translate to a higher sale price. 'The Block' makes it seem like a fresh coat of paint and some furniture will do the trick. While quick and inexpensive fixes may get you more money in a sale, they are only cheaper if you have the skills to DIY your renovations.
If you're not a renovating expert, you need to factor in the costs of labour, and the extended time servicing the loan on the property while the renovations happen.
There's not enough time
As previously established, maximising your return is all about time, and striking the balance between too little and too much. Time is money in this game, so if you're not willing or able to work hard and quickly on a property, then it's probably not the right investment game for you.
The approach for maximising a return in this market is like playing a game of property 'hot-potato.' If you keep it in your name for too long, you'll get burnt.
Not enough skills to make it cheap
Often, people new to housing investment will buy a very run down house thinking it will be easy to renovate. The truth is, if you're not already skilled in this area, the talent won't appear when you become a new owner.
The trick is to not overestimate how much you can do, or how many people it may take to do a job properly. The best approach to take is taking note of any gaps in knowledge you have from the start. If you've never tiled a bathroom, don't make your investment property the first experiment.
Factor in where you will need professionals, how long it will take, and how much it will cost.
These obvious checkpoints are essential if you are planning to embark on a 'buy' and 'flip' venture. The more you research, the more prepared you will be to actually make a return on the property you purchase.