Fixing and flipping real estate correctly for a large profit is work. Even knowledgeable and experienced investors may have a “gotcha” situation they did not expect or see coming. This is not a common occurrence once you have completed a couple of successful fix and flips.
Most investors cause their own troubles when rehabbing a property. Their mistakes can be a result of being unprepared with their systems and some investors allow the butterflies of greed and fear of loss to run their business instead of implementing the correct actions and formulas they have been taught. Sometimes a gentler investor allows others to bully them into dangerous situations.
Here are the top mistakes where investors have 100% control.
1. Paying too much earnest money deposits.
2. Over assessing the 30-Day ARV resale price.
3. Cutting profits for the property offer instead of following the formulas.
4. Having too short of a time contingencies for the hard or private money to fund and close.
5. Having too short of a time for an inspection and evaluation contingency.
6. Under assessing the construction repair costs.
7. Students performing the repairs instead of hiring skilled contractors to perform the work.
8. Over repairing the property for the value of the neighborhood or exit strategy.
9. Not creating a written, detailed scope of work for 3 like and competitive contractor bids.
10. Only obtaining one contractor quote with no detailed scope of work.
11. Failing to have an extensive written contract with the contractor which includes a timeline finish and a daily liquidated damages clause if the contractor does not finish on time.
12. Paying money up front to the contractor before the work is completed.
13. Not marketing the property to sell immediately while the repairs are being completed.
14. Depending only on the MLS and real estate agents to sell the property quickly.
15. Not preparing their credit scores for corporate credit and funding when they begin the property finding process.
16. Failing to secure the proper closing attorney or Title Company with a real estate attorney on staff which conducts “Pass Through” closings.
17. Allowing real estate agent to bully them and believing their lies.
When you manage your business correctly and professionally you will have a very smooth and successful transaction for a huge pay day.