16 Common Mistakes That First-Time House-Flippers Make

When you binge-watch a little too much HGTV, it’s easy to come to some crazy conclusions. Conclusions like, “House flipping looks easy! I should try it!”

Well, maybe you should — we sure won’t stop you! — but before you jump into your very first home flip, make sure you know what common mistakes first-time flippers are in danger of making so that you can avoid the same fate.

Not having the finances

Before you flip a house, you have to buy it. Depending on whether you’re paying all-cash or getting a mortgage loan (and whether you already own a primary residence or not), you will have to secure a down payment for the home, plan on paying mortgage interest for the months that you carry the mortgage, pay for utilities, and pay for the expenses of actually fixing up the home.

You might be tempted to assume that this will be a quick and easy project, but similar assumptions have taken down more experienced house-flippers than you. It’s much better to overestimate how long it will take then to underestimate — that way you can make sure you have enough money to cover the flip.

One money-saving tactic could be to move into the house while you renovate it (then you won’t be paying rent elsewhere). Be warned, though, that unless you live in the home for two years, you will still have to pay capital gains tax on any profit made from the flip.

Buying the wrong property

Like Goldilocks, you want a home that’s “just right” — not too expensive, or you won’t make any money, and not in too bad of shape, or you’ll spend more than you planned to fix it.

Paying too much for a home is one of the worst things you can do as a house flipper, so it might help to secure some real estate expertise from a local professional who can give you a good idea of what fair-market prices look like and help you ascertain if your offer looks good or if you want to seek out a better deal.

Additionally, a professional can help you understand how much profit you could potentially make, which is also easy to overestimate as a first-timer. And they can make sure you’re following the 70% rule. What’s that? Well …

Not following the 70% rule

Most fix-and-flip investors who have been doing the job for a while know and adhere to this rule. It’s not very complicated, but you may be tempted to indulge in some creative math to make the numbers work — resist! That’s a form of rule-breaking.

You do not want to pay more for a property than 70% of its fixed-up fair-market value.

So in other words, if you’re eyeing a home, and you have it on good authority from several people that after you fix it, you could sell it for $200,000 — do not offer more than $140,000 for that home. That is your 70% threshhold.

This will give you wiggle room to pay for the repairs and upgrades and to still make a profit.

Forgetting to make the budget

Are you getting the idea yet that flipping a home is a big exercise in math? Well, if you haven’t started laying all these costs out in a spreadsheet and figuring out what you can spend where, then start.

You’ll want to consider both the cost of the home (either paying for it outright or paying the monthly mortgage plus insurance, taxes, and any other expenses), the costs of the upgrades, the amount of time those upgrades will take, and the time on market once it’s ready to sell.

Again, a real estate professional (or another experienced house flipper) can give you a solid ballpark for all of these metrics if you don’t even know where to start.

Not getting an inspection

When you’re paying cash and you’re in a hurry — and you already know there’s a lot to fix in the home — then it can be tempting to skip the pre-sale inspection. Why bother?

Because that inspector might find a serious problem that’s going to cost you more to fix than you can afford. Foundation or structural issues are usually not cheap to solve and can eat up most (if not all) of your budget if they emerge unexpectedly.

Plus, when the time comes to sell the home, you’ll know that everything was done to get it into perfect condition if you bothered with an inspection!

Not securing the right permits

Before you start pulling out the sledgehammers for demolition, it’s a good idea to ascertain which permits you’re going to need for your upgrades. You don’t want to do all the work on a project only to discover that you needed a permit and might need to redo some or all of it.

Again, a real estate professional or someone who’s flipped houses before can help you here. They will have an idea of what permits are needed and can help you start the application process before you need them (not after).

Multitasking

When it’s time to actually get started on the work, you may be tempted to flit from project to project so that you can feel like you’re accomplishing something. Why continue working on that item that’s going to take a week to finish when you can just run over and finish two or three things really quickly?

If you’ve read anything about research on multitasking, then you already know the answer: It makes you much less efficient than if you focused on one thing and saw it through to the end.

Make a list of things that need to be done, and if you want to feel that sense of accomplishment, then plan to spend your morning working on major projects, and your afternoon on little items that help you feel like you’ve finished at least one thing.

Overestimating what you can do yourself

With the existence of YouTube, it’s pretty tempting to think that you can do anything with the right tools and a video.

But this is a major investment, and you are probably not qualified to do most of it. Putting a wall up or refinishing a floor? Sure, maybe. Any plumbing and electrical help will definitely require a professional, though, and you might want to consider finding a general contractor who’s willing to pitch in where you need.

If you have direct experience making a specific type of home repair, and you liked your results, then go ahead and assume you could do it again. If not, then for your first flip, hire a pro and watch them work so you decide if DIY might be an option — next time.

Not playing well with others

No flipper is an island, and that is especially true for first-time flippers, who haven’t yet discovered their core crew of people who can help them get the fixes in, and in quickly. You’ll need to rely on strangers to help you finish the job, and some people are better at doing that than others.

If you don’t deal with feedback well, don’t manage relationships well, or just generally don’t like working with people, then you should perhaps reconsider this method of money-making. You’re going to need to work with others, and work well with them; if that’s beyond your scope of ability, then maybe funding a flip and collecting some of the profit is a better choice.

The good news is that if your first flip goes well, you’ll be on your way toward building a crew for future flips.

Running out of time

You’re almost to your sales deadline, but the house is only half-finished. This is a real nightmare for a flipper, but it’s a common one when it’s your first flip and you have no real idea how long the fixes are going to take.

Overestimate how long you’ll need to finish the job, especially if you’re working by yourself. Leave yourself time to undo and redo some work (because you’ll probably mess something up), and don’t create a timeline that’s going to squeeze you beyond your abilities.

Don’t know how long it’s going to take? Bring in a general contractor and ask for time estimates. Add 50% or double the time on any jobs you plan to do yourself if you’ve never done it before.

Remodeling according to your personal taste

Many first-time flippers forget that they aren’t renovating the house for themselves — they’re doing it for a future buyer. And those flippers end up getting less for the sale than they could have because they insist on revamping the house according to their own personal taste instead of what sells best on the market.

A real estate agent can help give you a reality-check here and tell you that your preference for a separate kitchen, dining room, and living room is going to hurt the sale, or help you understand whether there’s really a demand in the area for a garage with a rock-climbing wall installed.

Neglecting the little fixes

There’s a lot to do in any flip, and it can be tempting to focus on the big items — floors, walls, windows, doors, and so on — and ignore the little ones.

But if you think that buyer isn’t going to notice that the kitchen drawers all stick, you’re delusional. Change the light bulbs, oil the hinges, and make sure everything (everything!) works and works well before you call it a day.

Upgrading too much

Depending on the neighborhood, a five-burner gas-range stove might be exactly what the house demands … but maybe not. First-time flippers often don’t know where to stop with the upgrades and do too much, creating a beautiful house that’s over-finished for the neighborhood, and installing features that buyers who are interested don’t really want.

That doesn’t mean you need to go for the cheapest option, but at least look at other listings in the neighborhood to see what the standard or “average” finishes and fixtures look like, then aim for that look. (This is another area where a real estate professional can be worth his or her weight in gold.)

Ignoring the outside

Well, the inside of this soon-to-be-flipped home looks amazing! Time to list?

Not quite. Have you paid attention to the landscaping? Put in new sod? Added flowerbeds to the garden, or otherwise improved the curb appeal of the home at all?

It’s a big mistake to focus only on the inside of the home and ignore the outside. A green lawn, fresh coat of paint, and some artfully placed flowers can work wonders on that final sales price.

Listing the house before it’s finished

You may think that you can show buyers what you’ve done and they’ll be able to imagine what the home will look like when it’s finished — but this truly isn’t the case. If you try to start showing the home before it’s actually ready, then all buyers are going to see is a half-finished project.

They don’t have access to the vision in your head. Don’t try to force them to create one, or the house will linger on the market for longer than necessary … and you’ll have missed your first, best chance to make an amazing impression with your flip.

Counting on the market to pull the price up

When the market is hot, it can be really tempting to hope that it will have escalated enough in the months that your flip was being renovated to bump up the sales price. We all hear the stories about how prices are rising, so why shouldn’t you expect them to rise while you work?

Because housing markets, like all markets, are subject to outside forces beyond your control that you cannot predict. If you’re counting on the market to grow, and that doesn’t happen — what’s your Plan B? Will you still make money on the sale, or will you lose your shirt?

Don’t risk it. Make sure that you can still make a profit even if the market doesn’t jump while you’re working on the house. (And if it does? Consider that a pleasant surprise.)

Staging without a pro

Many flippers are also great at staging homes, and this could well be you in the future. But for your first home, do yourself a big favor and budget for a stager from the beginning.

A professional stager will tell a story with the home, tying rooms together with color and texture, and helping buyers envision their lives in your flip. Watch and learn from the pro, and then maybe you can try staging on your second (or third, or eighth) flip.

TransactionDesk Tips & Fabulous Features

I like to think of myself as cautiously optimistic when faced with forced change and that was my mindset as I started using TransactionDesk. Now, having used the new platform for several months, I am thrilled with the change and want to share with you how this new forms software is going to make you a better agent!

  • Customization – Set it up once and TransactionDesk and AuthentiSign will brand your value with every electronic signature you send or email you compose from the platform. What better way to softly remind your clients that you love referrals or show off those hard-earned designations and communicate your level of professionalism. Branding banners, in a world where us REALTORS have to know our value proposition, is a win.
  • The Wizard – It really could not be easier with MLS connectivity and the Create Transaction Widget. Our time is valuable, and this part of the platform allows us to accurately input information and then never have to type it again. Say hello to auto-population on our forms and enjoy saving some time.
  • Templates, Contacts and Layouts – Accurate contract writing just got easier. Never forget a form again because you use the Templates feature and if there is something you put on a form every time you only need to type it in there once. Check the box when setting up your transaction contacts in the Wizard for “add to address book” and you will be able to just select that contact going forward and watch it auto-populate into your forms. Layout some signature, initial blocks or check boxes once (like check boxes on the Buyer Attachment to the Residential Purchase Contract) and then apply that layout in AuthentiSign in the future. How nice to only have to drag and drop those 8 check boxes one more time, save the layout and just apply it next time you need it!
  • Print Drivers – “Did you just get commission instructions emailed to you?” Wouldn’t it be nice if you could just drop that directly into AuthentiSign for your broker to sign so that you can be notified when the task is completed.  YOU CAN! Just install the print drivers and then you can print email conversations, attachments or files right from your computer or cloud into the Docbox or AuthentiSign. This feature is not available to Mac users, but you can still achieve these things by using the transaction email link that is provided by TransactionDesk for every file.
  • Risk Management – If you use the full capabilities of the Wizard and input transaction dates then you can set up Tasks that will automatically email you a daily list of things you need to be on top of….like the end of an inspection period. Think of it as an interactive critical date list that makes you work smarter not harder.

There are so many fabulous features in TransactionDesk. Know that you won’t hurt it, go in there and play around. Set up some “test” transactions and run through the software. Tap into their handy help videos to learn and implement one new thing a week that will make you a better agent. Finally, take some classes, one class is not enough to maximize this AAR Realtor benefit because there is so much to learn, use and enjoy.

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Arizona REALTORS® gather in in Marana for Major Investor Event

Arizona REALTORS® gather in in Marana for Major Investor Event

The Tucson Association of REALTORS® (TAR) drew a crowd for their Major Investor event last week hosted by Nikki and Bruce Halle at their home in Marana.

Over 50 guests attended, and 10 REALTORS® became Major Investors on the spot, with a few more expected in the next week or so. Major Investors are REALTOR® Members and Affiliate Members who invest $1,000 within a year to the Arizona REALTOR® Party to help protect the real estate industry, their clients, and property owners. Each year the Arizona REALTOR® Party saves REALTORS® across the state thousands of dollars by advocating on their behalf at every level of government.

Just this last year, a single bill in Arizona would’ve required every REALTOR® to provide a DNA sample to the state and pay $250 to have it processed and retained. The Arizona REALTOR® Party stepped in and ensured the bill would not impact REALTORS® in any way by amending the legislation to exclude REALTORS® from the bill. And that was just one of the 1,318 bills introduced in the state legislature this year alone, with 177 directly impacting the real estate industry. It’s thanks to REALTORS® who invest, especially the Major Investors, who make this protection and advocacy possible.

Prior to last week’s event, TAR already had the most Major Investors in the state with 32, and they will continue to maintain their top spot with 42! The REALTORS® and professionals in Tucson understand the importance of protecting their business from harmful regulations from City Hall to Congress. TAR has worked hard to create a strong culture of engagement and investment and the results are paying off.

If you’d like to help protect your industry, you can invest here.

100 percent of your investment goes directly to advocacy and helping make it possible for your local association, the Arizona REALTORS®, and the National Association of REALTORS® to represent your interests in government.

Your association leaders and volunteers will be meeting Sept. 4th in Phoenix to improve their advocacy skills to better represent you, but they can’t do their best without your support.

If you ever have questions about the Arizona REALTOR® Party, contact the REALTOR® Party Director Charles Siler at charles@aaronline.com.

The post Arizona REALTORS® gather in in Marana for Major Investor Event appeared first on Arizona REALTOR® Voice.

How to Effortlessly Save for a New Phoenix, Arizona Home

…even while you’re still renting.

If you’re renting your current home and have your eye on making a home purchase in the near or distant future you might be worried that it can’t be done. The good news is that there are some effortless ways to grow your home savings with a little bit of set up and a touch of discipline.

1) Know your goal.

The best place to start is knowing how much cash you’ll need and by when. Typically, you should aim to save 5-20 percent of your planned Arizona home purchase price to qualify for a traditional 30-year mortgage. This amount might seem overwhelming at first but, when you break it down into annual, monthly, then weekly goals, it’ll start to feel much more manageable.

Defining your timeframe goals will help to better understand what would be required of your saving habits on a regular basis. Once you’ve figured out how much you’d need to save each week, you may wish to re-evaluate your time goals to reflect a more relaxed saving schedule if the first iteration feels too aggressive.

2) Pay Down Credit Card Debt.

If you’re carrying any consumer credit card debt, try to reduce that first before focusing on saving. When you attack your high-interest credit debt, you’re moving towards a higher credit score which will improve your chances of getting a mortgage– debt is a considerable factor lenders use to qualify you for a loan. Your higher credit score can even result in better mortgage interest rates!
Note: This may result in a smaller difference between mortgage payments after a smaller down payment than what you may initially be planning for, so plan carefully if you’re hoping to increase your budget!

Once your debt is paid off, you’ll not only have a lot more money available in your budget to set aside for a down payment, but you’re ultimately decreasing the cost of paying off your debt in the long-run.

3) Use a budgeting app.

Many free budgeting apps rake through your bank accounts and online credit card statements to track your spending for you. Once you have a good understanding of how much you’re spending, assess what could be cut back and set a maximum budget for each category. Then, plug in your target monthly savings amount for your newest budget item – a new Phoenix, Arizona home!


4) Lower your biggest living expense.

Saving for a down payment on a home is going to be tricky if you’re living in a high rent district. Consider finding a smaller rental in Phoenix, Arizona, living with friends or family, or taking in a roommate to lower your biggest monthly payment — your rent.

5) Automate.

The easiest way to save money is to make it automatic — take savings right out of your paycheck so you never even see it before it goes into your savings account. If you can’t see it, you can’t spend it! Alternatively, you can set up an automatic deduction to transfer a weekly amount from your bank account into a savings account. Your savings isn’t the only thing you should automate – to save money on potential late fees, automate all your bill payments.

6) Stay positive.

Frame your down payment goal as an exciting thing to look forward to rather than a chore. This helps to avoid stress as you approach dealing with financing your new home; you’ll also find that saving money will start to feel less like a fixation on money you don’t have and more on the wonderful home you will have in the future! Don’t forget to budget for a small treat every now and then to reward yourself and keep things feeling upbeat. You may even find that you’re so excited by saving that you use some of your flexible spending funds to save extra money for the month!

7) Make more money.

If the majority of your income is already tied up in expenditures that can’t be cut from your budget, consider taking on some side jobs. Look around your home for things you’re no longer using and arrange to sell them. You can also use one of your personal strengths, like writing or painting, to start a viable side hustle and get paid for your skills; all of this extra money can go directly to your home savings goal.

8) Make accessing your savings inconvenient.

It’s easy to see something you want and find a way to rationalize dipping into your savings. Take the willpower out of the decision by making your savings difficult to access. Put the savings in an account that doesn’t have an ATM card linked to it, or use a bank that requires you to make withdrawals in person.

Keep in mind these tips as you begin saving to buy your Phoenix, Arizona dream home. Also remember that you can always seek out help from your local real estate pro to give you an overview of the Arizona real estate market and to find a lender or financial coach to help you get started on the right foot.