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The first mistake people make when flipping houses is underestimating their timeline. A lot of people get into a deal and are very optimistic. Often times, people will calculate their numbers and put it on a three month flip, but flips will take longer than three months. Full renovation flips typically never sell in three months. For us, they take around five months on average.
The second biggest mistake is underestimating the rehab costs. You should always get a true rehab cost and the way to do that is by going out and hiring someone else. You will never be able to scale your flipping business if you’re the only one doing the work.
The third mistake is overdoing the rehab. Flipping houses is a business. You are not building your dream home every time you flip a house. Anytime you’re renovating you need to remember that if you spend $1 on renovating, it should yield $2 in profit.
The fourth mistake is speculating on the ARV. You want to use what’s already sold. Don’t speculate on things you can’t control. Copy the comps, if the comp is at a certain price and done at a specific level of rehab, that’s what should be done.
The fifth mistake is not factoring in money costs. Money costs are whatever it costs you to get the loan for that property. When starting out, many people don’t realize how expensive money can be. Before making offers on flips, make sure you understand what money cost is.
If you make any of these mistakes, it costs you hundreds to thousands of dollars. Try not to let your emotions get to you and pay attention to the data to determine if it’s a good deal or not.