Fix and flips are a major real-estate investment strategy. You can take on these projects and make a living out of it or use them to raise money for buy and hold deals. This article is about some issues that can throw off your project and how to avoid them.
- Taking too long to do the job.
Most fix and flips projects are funded by borrowed money, like a hard money. When you borrow money you’re responsible for paying it back, and most hard money loan borrowers use the money from the sale of the property to repay the loan. The problem here, though, is that you can’t sell the property you’re renovating if you’re still working on it. No one expects a project to get done in a blink of the eye, but creating a realistic timeline and sticking to it the best that you can helps tremendously with time management.
- Not creating a budget.
Remember to create a realistic and (minimally) flexible budget before starting your project. This might sound pretty obvious, but it’s more so about sticking with the budget. Things do come up, which is why your budget should be just flexible enough to account for any potential issues or changes.
- Not taking any possible problems into consideration.
One of the most efficient ways to minimize and potentially eliminate any possible problems is by inspecting the property as thoroughly as you possibly can before purchasing it. Even if the inspections show you a few minor issues that might not prevent you from purchasing the property, you might be able to negotiate a lower price from the seller. This can be helpful because the money you saved purchasing the property can go towards fixing the problem spots.
Another thing you can do is add a “just incase” section to your budget. If you’re going to do this, the amount of money in this section is typically 10% of the total budget, but do whatever feels comfortable to you.
Fix and flip projects can bring in a great profit if done correctly. If you’re looking to fund your next project, contact us and get some more information on our hard money loans.