Many new real estate investors assume that flipping houses is simply a matter of purchasing a fixer-upper, remodeling and re-selling it (I know Tarek and I thought that when we first started!). But we have learned over the years that there is a lot more to consider when flipping houses, at least if you want to be successful at it.
Whether you have been flipping houses for years or you are remodeling your first flip, there are several warning signs that are a good reason to stop pursuing that flip house you’ve been eyeing for the past month. Avoid accepting a deal if any of these signs applies to you.
YOU DON’T HAVE A TEAM
Don’t pursue house flipping by yourself, especially if you don’t have a lot of time on your hands. Put together a team before you even start flipping. Doing so will increase your chances of becoming a successful real estate investor and you will avoid purchasing fixer-uppers that turn into flops. A few of the key team members that I recommend lining up are lenders, real estate agents, contractors, accountants and attorneys.
YOUR VALUATION IS BASED SOLELY ON AN INTERNET SEARCH
One thing that is sure to lead to disaster is determining the after repair value of your flip using only the internet. An internet search will give you somewhat of an idea of the flip’s value, but you’ll get the closest estimate by working with a real estate agent who is familiar with the area where you want to purchase the property.
YOU INVESTED ALL OF YOUR SAVINGS INTO HOUSE FLIPPING
While it is possible to invest all of your savings into house flipping and still come out on top, I would highly recommend avoiding this strategy. Don’t risk your life savings; instead network and build relationships with people who would be interested in investing in your cause and offer them something in return. This way you’ll both benefit from your house flip.
YOU ARE MANAGING WITHOUT EXPERIENCE
Trust me when I say that renovating a house is harder than it looks. Although it seems like a fresh coat of paint and some new carpet will do the job, it is a much more complicated process. If you aren’t familiar with how to do something, hire someone who does. Hiring a professional will help you save a lot of time and money that you can’t afford to waste.
YOU HAVE OVERCONFIDENCE
If you aren’t new to the house flipping world it can be all too easy to fall into the trap of overconfidence, especially when you’ve had several successful house flips in the past. You might think that nothing can go wrong with your next flip when you’ve had such great luck previously, but this type of thinking is sure to backfire. When you come across a house that looks like it would make you a huge profit, look for anything that might prove you wrong, this will keep you from becoming too overconfident with your flip.
YOU HAVE A GUT FEELING THAT THINGS MIGHT NOT WORK OUT
Investing in real estate, especially when you are a new investor, naturally comes with some fear. If you are feeling extremely overwhelmed with fear about purchasing a property, it might be good to think twice about your decision. More often than not, following your gut will prevent you from making a bad decision.
Tarek and I have found that avoiding a flipping disaster is easy if you acknowledge these warning signs before purchasing a property. If you are willing to forgo a deal when one of these things occurs, you will be much more successful at navigating the world of real estate investing.
(Originally appeared on Huffington Post)