Discover the single biggest mistake you can make with fix and flip houses. If you have ever purchased a fixer upper house, remodeled it and then flipped it in hopes of making a profit, you know that there are tons of mistakes you can make! Fixing and flipping houses is literally a treasure trove of pitfalls and everything that can go wrong, will go wrong. But which mistake is the biggest one you could make with fix and flip houses?
Fix and Flip Scenario
Imagine a seller has just agreed to your low-ball offer and now have a great fix and flip deal. What will you do to ensure that you don't make a big mistake on this deal? Due diligence. You're going to investigate the property.
Home Inspection - You will potentially hire a home inspector. And they may uncover some hidden things you didn't see when you were making that offer. I have a great video on things that inspectors often overlook, and there are some good tips in there.
Termite Inspection - You might get a termite inspection. Even in the northern part of the United States you can have termite damage. We have someone in the Great Lakes area with a ton of termite damage in a property they were looking at. So yes, termites can be in the colder areas too.
Survey - There may be a fence, or maybe a detached garage or a shed that could be encroaching on a neighbor's property. So, you might get a survey.
Appraisal - You may also get an appraisal not only so you can get both an as is as well as an after repaired appraisal for your estimates, but also because you may need one if you're getting a loan.
Comps Research – You will do some comps research as well. Maybe you drive by a couple comps. And if there are some active listings, you might get inside a house.
Meet Contractors – Finally, you will probably meet with your contractors and go through each and every aspect of the rehab project to make sure that you have a clear understanding of what the costs are going to be. You might even call some suppliers for cost estimates and make sure they have materials in stock.
You're going to do all this due diligence so that you make the right decision. You will turn over every stone to make sure that there are no gotchas, no hidden problems. And what if you discover some things that are different than your original assumptions when you first made the offer? Well, you renegotiate with the seller.
So, you did all this due diligence and found some hidden problems. You renegotiated to compensate for that and now you have an amazing fix and flip deal. The coast is clear, and you go ahead and close.
You get straight to renovating the property. It may take a little longer than you hoped. Maybe you have a few delays with contractors and materials or permit delays. However, you get that rehab finished.
Then you put it on the market, and you resell it. Now, it doesn't sell for as much as you were hoping, and that's because the market shifted a little bit since you closed on it. And that's been happening a lot to people lately. But you still make a good profit, and you live to fight another day. Where's the mistake? What's missing?
Biggest Mistake with Fix and Flip Houses
The biggest mistake you can make with fix and flip deals is not trying to sell every single one you do. Always, always, on any fix and flip deal, try to sell it before you renovate and embark on all the risk. There's literally no downside and there's plenty of upside. If someone comes along and is willing to pay way too much for the house, let them take the money pit. It will also give you great litmus test to know if you really have a great deal on your hands.
A Quick Nickle Beats a Slow Dime
The great thing is you don't have to sell it. Even if you list it on the MLS, you don't have a legal obligation to get rid of it. You can just decide to keep it and renovate it. But remember the phrase I've said so many times before, a quick nickel beats a slow dime. In the real world, especially in the market we're in right now, it's not a slow dime, it's a slow nickel. The quick nickel comes from the fact that you have very little expenses, and you get it sold right away. Even though you sell it for less than if you had fixed and flipped, you skipped all the potential pitfalls and still made a good profit. Or as my mentor's mentor used to love to say, “You can't go broke taking a profit”.
By putting the house on the market, you put yourself in a position to exit early and make a lot of money. And if you don't exit early, you still know what you're getting yourself into because now you have a lot more feedback. The biggest mistake you can make with fix and flip deals is not trying to sell every single one you do. It is so smart, no drawbacks, only upside. And what you'll discover is most of the time there’s one sucker who's willing to pay way too much.
Best Way to Sell a House Fast: I teach my apprentices how to sell a house before they close. Why close if you don't have to? But whether it's before or after you close, you want to market the property for sale before starting renovations. I have a great video on that called the Best Way to Sell a House Fast in Any Market.