Leslie approached me at the library one afternoon to ask about becoming a real estate investor, like me. I don’t know her that well, but our kids go to school together and, from what I can tell, she’s got her act together better than most. She works full-time at a corporate job and, somehow, runs around after two very energetic little ones too. She also volunteers with a local shelter. I don’t know how she does all of it and I’ve told her as much several times in the past.
But, that afternoon in the library, she admitted she wasn’t happy with her work and had been wanting to talk to me about where she could learn how to flip houses as a beginner for over a year. And, since she had a family and other passion projects to think about, she wanted her career transition to be as smooth as possible. That, I told her, would take her learning what not to do as an investor as much as it would take her understanding what to do.
How to Flip Houses—and Avoid Mistakes—for Beginners
With any career change comes having to traverse unknown territory and, sometimes, a little learning by trial-and-error too. Mistakes are almost always bound to happen. But, provided you’ve been properly trained, navigating the challenges of succeeding at a new corporate position is achievable and shouldn’t cause you any trouble. Any missteps you make—and are expected to make, in fact—will rarely put you or your family’s finances at risk.
Embarking on a career as a real estate investor, however, is different in a couple of key ways. First, the risks of investing in residential property can be so great that your finances, and your livelihood, do become adversely affected.
Enrolling in a real estate investing education company may do well to help you mitigate some of the risks. But, no matter how well trained you are, there is still little room for making mistakes when you’re flipping houses. Of course, being your own boss and having a say in your earning power is another critical difference between working as an investor and doing anything else—a distinction that can also make the risks worth taking.
Still, you’ll want to succeed at buying, renovating, and selling houses for a profit, not just get by. After all, no risk is worth it if it doesn’t potentially pay off by providing for you and your family. And, like I told Leslie, to do that, you have to ensure you avoid these common rookie mistakes:
Miscalculating your ability
It’s tempting when you start flipping houses to miscalculate your own abilities and, unfortunately, the consequences of doing so can be costly. Even if you’ve got design or construction experience, and have been trained by a skilled team of successful investors in their own right, your first project should be a minor rehab. In fact, depending on your level of expertise, you may want to make your first few flips as easy as possible. Whatever you take on—whether it’s a small one-bedroom that could use fresh paint, fixtures, and carpet or a large three-bedroom that needs a new kitchen, plumbing, and electrical—you will have to work hard. But, taking on everything at once, before you’ve gotten a real feel for what it’s like working in the field, can cause burnout. It can also burn a hole in your pocket if you attempt to do the renovation yourself and have to hire someone to repair your mistakes later. So, in the beginning, do yourself a favor by buying a house to rehab and resell that you, and your crew of experts, can manage.
Miscalculating the numbers
Spending too much on the purchase of an investment property, or its renovation, and selling it for too little are all common mistakes that new investors make—and that you should avoid. Each miscalculation can eat into your returns and a combination of two or more can wipe your plate of potential profits clean. But, without an effective real estate investment analysis and valuation tool to help you correctly calculate the numbers—and make smart investment choices—you can almost expect to do things like pay for a house that you think needs a “lipstick rehab” when what you’ve bought is a major renovation. And, without first hiring a licensed inspector to thoroughly examine the house, getting your numbers as close to right as possible is almost always going to prove challenging. So, spend some time to find great tools, and people, that will help you run good numbers.
Miscalculating your market
If you don’t carefully correctly assess your target market when planning the rehab, selling your investment property quickly—and at the price you hoped for—could be difficult. Unfortunately, this kind of mistake is one that’s frequently made by first-time investors and it’s not hard to see why. With so many shows about house flipping on TV, you can easily get caught up in wanting to follow the latest on-air trends. It’s also easy to renovate according to your own personal style. High ceilings and chandeliers, however, may not fit the tastes of the young families who tend to buy in the neighborhoods where you invest. And, a game room where there once was a garage may be what you’ve always wanted, but that doesn’t mean your car-owning buyers will. To get the most out of your investment and realize the best possible returns, be prudent about design decisions. Your buyers, and your pocketbook, will thank you.
Miscalculating the amount of time that a rehab can take is a critical error that won’t serve your bottom line, or your business, very well either. Typically speaking, the timeline for flipping houses falls somewhere between three and nine months. But, even within that timeframe, underestimating how much time you need to renovate a house and get it back on the market can impact when the house sells and for how much. If, for example, you estimate that a project will only take three months and, instead, it takes eight or nine, you could find you’re trying to offload the property over the holidays or during a harsh winter season when no one is buying—or even looking to buy. And, if you had to get a hard money loan to fund either the purchase or the repairs, full payment could come due before your project is through. That is going to hurt to handle, assuming you and your bank account can handle it at all.
Assuming your property is safe from natural or manmade disasters and not securing your investment with property insurance for flipping houses is a mistake you never want to make—no matter how long you’ve been investing. Even when only holding a house for a short period of time for a basic sprucing up, anything can happen and often does. And, when it does, if the house isn’t insured against break-ins, fire, or flooding, and you have to pay out of pocket, your potential ROI will be in danger too. Protecting your investment property isn’t terribly pricey but miscalculating the coverage you need, and whether or not you need it, can be. Save your future self financial grief by always safeguarding your properties.
As a new investor, there is a lot to learn to make a good business out of flipping houses and not a lot of wiggle room for making mistakes. One major miscalculation can send your potential profits—and a potentially successful career—far out of reach. But, even several small blunders can add up to a big financial mess. That’s why, it’s critical—for you and those you care for—to invest like a pro from the very beginning. And, if you’ve got someone like me to ask how, transitioning into it smoothly can be easier than you think.
Flip Houses Like a Pro From the Very Beginning
During my early days of investing, I made so many mistakes. And, most of them could have been avoided had someone just told me what to look out for. When I look back, I’m grateful that none of them—not even the time I didn’t insure a property that was later damaged in a storm—broke my family’s bank. I’m also lucky that after only a couple of years of investing by trial-and-error, I decided to change course. I became an independently owned and operated HomeVestors® franchisee.
To me and my family, it was clear that, even after buying, renovating, and selling two homes, I needed to learn how to flip houses more successfully. By becoming a HomeVestors® franchisee, I was trained to do just that in a comprehensive week-long initial training followed by ongoing mentoring from my seasoned Development Agent. I was also given some of the best tools and resources I needed to stop me from making more rookie mistakes and to start turning my job as an investor into a professional career that I loved. Once I got my franchise going, I no longer did things like overestimate my ability to take on a major fixer or underestimate the costs of doing so. And, once Leslie gets going with hers, she won’t likely make those mistakes at all either.
To start your professional real estate investing career like a pro from the beginning of your investing career, don’t make the mistake of going it alone. Contact HomeVestors about joining the franchise team today!
Each franchise office is independently owned and operated.