If you are on one of those enterprenurial types who buys properties that need some work and then sells them after the work is done, then you’ll be interested in the following information. This information comes from years of experience, and a few hard knocks of our own. So if your interested in your Edmonton area flip not being a flop, then read on. Your goal may be to build wealth quickly by buying and selling properties, but the reality is that flipping properties is a tough business. Here are the top 12 mistakes "flippers" make:
- Fudging Financing. Lying on a mortgage application is a mortgage fraud. So no matter how tempting the flip give your mortgage broker accurate information. Mortgage fraud can result in jail time, and is being aggressively enforced.
- Overpaying. No matter how promising the property, the bottom line is trump.
- Lacking cash. Desperation makes investors do crazy things. When you act in haste, you’re more likely to make poor decisions.
- Quitting your day job. A steady source of cash staves off desperation.
- Hiring unlicensed contractors. Not only do they present an insurance risk, but worse yet, often they don’t get the job done.
- Workers compensation coverage. I know this doesn’t sound like a cheap way to get things done but if one of your workers gets hurt on your reno, you’ll wish they had coverage especially when your card box that you’re living in is leaking because they took you to the cleaners.
- Buying sight unseen. You can bet it will be uglier than the seller said it was.
- Buying property far, far away. Even the tiniest repair can mushroom into a crisis. Some times even small items need to be attended to very quickly.
- Buying too many properties too fast. Too much money, too little time means the bank will own the properties sooner rather than later.
- Underestimating remodeling costs. There’s no such thing as a cheap and easy fix especially on high end remodels.
- Having a poor exit strategy. Running out of cash and living on credit cards doesn’t work.
- Selling Yourself. I know you’re a do it yourself’er now. But as I sit here I am actually laughing at this one. You may as well pull your own teeth and be your own financial adviser now too. Oh and by the way a good relationship with the right Realtor can always make you money and give you an informed opinion on values and renos.
This article was inspired in part by NAR’s 10 mistakes flippers make. Sounds like something dolphins say to each other, like don’t swim with the Tuna.
