If you’re new to house flipping sometimes you simply may not know what you don’t know. The more you become a student of the industry, and listen to sound advice from the pros, the better your chances of success.
In an April interview with Yahoo!Finance real estate agent and investor Mindy Jensen—recognized by GOBankingRates as one of Money’s Most Influential—offers some warnings and advice for novice flippers. We’ve summarized some key takeaways you should know.
Flipping Mistakes to Avoid
Not crunching the numbers: Make sure there is a large enough profit margin on a project so you are poised for a good return on your investment.
Falling in love with a property: “If the numbers don’t work,” Jensen says, “don’t buy the property.” There will be other properties that are just as great.
Not being well funded: As a flipper and investor be sure to have a large enough cash reserve to handle repairs and mortgage payments, says Jensen.
Buying properties that can be categorized as weird: “Never buy weird. Weird, unique, unusual are all four-letter words in real estate. You want normal, traditional, interesting-but-ordinary when you are buying a house.”
Not having multiple exit strategies: Jensen warns that market conditions can change at any time, or a sale could fall through unexpectedly. You should be prepared for anything, and be agile and adaptable when circumstances are out of your control.
Advice for Flipping Newbies
If you’re new to flipping houses Jensen recommends studying your local real estate market and learning everything you can about it before purchasing a property. Find out what prices houses sell for when they’re in good condition, and in poor condition. Learn about the local job market. How much are rents?
“Once I knew all of that,” says the real estate guru, “I’d start buying houses—old houses in appreciating markets to fix up and sell. Nicer houses in stable markets to rent out to great tenants.”