Seven Fix and Flip Pitfalls to Avoid

Fix and flip project returns have fluctuated over the last year, and then slightly declining earlier this year due to low housing inventory. As distressed properties are expected to start hitting the market in the coming year, you will want to read our fix and flip pitfalls to avoid and learn how to maximize profitability.   

1.) Waiting for properties to hit the MLS   

Today’s real estate market is highly competitive, with high-demand properties receiving multiple offers over asking price. To get ahead in the fix and flip game, you must find properties before they hit the market. Work your contacts and ask around to find property owners interested in selling but either don’t have the ability or the desire to put in the work to make it market-ready.   

Read our blog Top 5 Things about Flipping Houses for more tips on finding the perfect property.    

2.) Coming in too low    

Property values are at all-time highs, and you should expect to pay more than you would five years ago. Coming in too low is one of the major fix and flip pitfalls to avoid, as it can cost you the property altogether. You simply can’t flip something you don’t have.   

3.) Ignoring property details you can’t change   

Low inventory can make buyers desperate to get their hands on a property, making it easy to overlook or make light of glaring issues that will come back to haunt them when it comes time to sell again.   

Location is the main factor that you cannot change about a property. Is the property easily accessible? Is the lot small or unusable? Is the driveway too steep? Is the property located in an area prone to flooding? These and other undesirable factors can contribute to more days on the market and lower sales prices, ultimately affecting your bottom line.    

4.) Cold calling contractors   

Before lining up a property, you should interview contractors so you know to know who to call when the time comes. Preview their work, get estimates, and talk about scheduling. You want to find a reliable contractor who can quickly perform the work you need, so your fix and flip project stays on schedule.   

Working with business partners? Read or blog, Information You Need to Get Before Committing to Business Partners

5.) Not knowing your buyers   

The last thing you want to do is spend money on features potential buyers won’t appreciate, which can go both ways. Become familiar with recent comps to make sure your renovations and budget line up with market demands.    

Skimping on important details is the first fix and flip pitfall of not knowing potential buyers you want to avoid. The first piece you want to watch out for is skimping on important details. Don’t choose the cheapest kitchen faucet and move on. Instead, select an option with a design buyers will appreciate at a fair price point.    

You should also avoid going with bold and expensive statement items, such as bright paint colors or imported tile throughout the property. Instead, opt for custom tile work in the entry area or a pop of color on an accent wall that could easily be updated to fit buyer preferences.    

6.) Not budgeting correctly   

Budget is what will make or break your fix and flip project, and one of the biggest pitfalls to avoid is not budgeting enough to finish the work. Fix and flip projects require significant cash flow for short periods. Make sure your budget has a buffer to accommodate unexpected repairs or project delays.    

Also, be careful of letting budget constraints get in the way of returns. Sometimes it makes sense to invest in a project that will generate a higher sales price. For example, taking down a wall is expensive and can be complicated, but the open floor plan it creates will pay off in the end.     

7.) Not having financing lined up     

The biggest fix and flip pitfall to avoid is not having financing lined up because you have to act quickly in this market. If you are interested in taking on a fix and flip project, you need to speak with our financial advisors. Our unique line of credit program offers a one-time underwriting, making it easy to acquire real estate in markets where you need to close fast.    

Barrington Commercial Capital is different from a traditional bank when it comes to lending because we have access to more products with less red tape. Our loans are secured by non-owner-occupied assets with a focus on fix and flip loans.   We can also finance buy and hold investor-owned properties, large multi-family renovations, ground-up construction, and smaller in-fill projects.  

If you would like to discuss our fix and flip financing capabilities, please contact us by filling out the form below or give us a call at 404-602-9100. To stay up to speed on all things Barrington Commercial Capital, follow us on Facebook and LinkedIn. And lastly, sign-up for our monthly email below to stay informed of the latest commercial capital options available to you and your business.