Common Reasons House Flips Go Off the Rails

Although flipping homes stand to generate a sizable amount of capital, this shouldn’t be taken to mean that every flip is equally successful. In fact, there are a variety of reasons for which house flips go south – many of which are associated with inexperience on the part of flippers. Fortunately, by educating yourself on some of the most common problems flippers experience, you can significantly diminish your chances of encountering them. Fledgling flippers who are determined to keep things from going off the rails would do well to read on.

Lack of Location Research

No matter how profitable you think a potential flip will be, it is imperative that you engage in proper location research before committing to purchase. As many experienced house flipping investors can attest, location is everything in real estate, and if you choose to flip a home that’s located in an undesirable area, you may not see the desired returns.

So, before breaking out any paperwork, take some time to research the location of any prospective flip you have your eye on. Throughout the course of your research, take a close look at population size, growth projections, local economy, local job market, crime rates, rent prices and property values. This information should give you a good idea of how much you should pay for a potential flip, as well as how much of a profit you stand to make from it.

No Pre-Purchase Inspection

Although prospective flips tend to be less expensive than most homes, there’s no denying that many of them are quite expensive. A comparatively inexpensive house is, after all, still a house, so the average flip is going to cost you a fair amount of money. That being the case, it’s in your best interest to know exactly what you’re buying, and the best way to ensure that you make an informed purchase is to work with a certified home inspector.

A knowledgeable home inspector will be able to locate and diagnose an extensive assortment of property issues that people outside of their field are likely to miss. Once you’ve received the results of the inspection, you’ll be aware of any repairs or renovations the property requires. Depending on how extensive the necessary repairs/renovations are, how much they’re projected to cost and how much you stand to make from selling the home, walking away and setting your sights on other potential flips may be the wisest course of action.

Conversely, if you decide to forgo a pre-purchase inspection, you may be in for a number of unpleasant surprises once the flipping process is formally underway. Furthermore, depending on the kinds of issues that present themselves mid-flip, you may have no choice but to halt all work until such time as you’ve procured enough capital to complete the flip. And depending on how expensive the additional work is, you may wind up selling the house at a substantial loss.

So, no matter how insistent a seller is that you abstain from having a pre-purchase inspection, don’t give in. Not wanting to tank a sale is perfectly understandable, but in the absence of a professional inspection, you’re liable to lack a solid understanding of what you’re purchasing.

Hiring Unlicensed Contractors

Dependable contractors can be invaluable allies to any house flipper. On the flipside, contractors who lack proper licensing can turn even the simplest of renovations into a costly nightmare. In order to keep their respective licenses, licensed contractors must demonstrate a certain degree of expertise and conduct themselves with a certain degree of professionalism. Unlicensed contractors, on the other hand, have no such incentive and are known for providing inaccurate estimates, treating customers poorly and walking away from jobs that are incomplete. So, regardless of how tempting you find their comparatively lower rates, you’d do well to avoid hiring unlicensed contractors.

Few things are more stressful, infuriating and financially cumbersome than a house flip that’s gone off the rails. Given how much capital the typical flip requires, it stands to reason that investors would seek to keep things as cost-effective as possible. However, as a result of poor planning, insufficient experience and various other factors, many flips go south in a very expedient manner. So, if you’re looking to ensure that your first house flip goes off without a hitch, take care to avoid the mistakes outlined above.