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Rookie mistakes when flipping a home.

With mortgage rates still at all-time lows and lots of homes available at prices below market, many people are turning to real estate investment for the first time.  In order to be safe, new investors often start out with flipping homes instead of holding a property for its rental value.  Here are some of the top mistakes rookies make in home flipping and how to avoid them.

Not Allowing Enough for Repair Work

This is usually the biggest mistake made by new investors.  People who have never renovated a home often underprice the repairs needed to make the home attractive enough to sell.  This is why seasoned investors recommend that new investors talk to a contractor BEFORE placing a bid on a home.  Getting a good price upfront will help determine if the house is worth the purchase. It is also wise to add a bit of cushion for Murphy's Law for things that just go wrong for no reason.

Allowing Emotion to Let You Pay Too Much

Some investors find the “perfect” home and go full steam ahead with the purchase.  They find a home with a discount in a hot area and they just KNOW that they can sell it for a quick profit.  This is where cold, hard facts should take the lead, not emotion.

An investor should never, ever buy a home for anything more than 70% of the home's repaired value.  This is a rule of thumb that has been used by many investors for years and it has served them well.  Paying more than the 70% will lead to smaller profits or even a loss.

Trying to Do Too Much

Many new investors envision themselves remodeling the bathroom, adding new paint and then finishing up the front lawn in a few weeks and then, voila, the home will sell.  However, it is best to let the pro's handle the tough work.  Repairing or remodeling a home can require some or all of the basic contracting skills such as carpentry, plumbing, masonry, painting and electrical.  It is simply too much of a daunting task to try and do all of this on your own unless you have considerable experience in these areas.  Even if you can do it all, wouldn't it be better to hire someone to do this type of hourly work while you search for the next deal?

Taking Too Long for the Repairs

Each month that you own a property is another month of expenses for items like utility bills, insurance and property taxes.  This can eat in to your future profits and may even cause yourself a loss.  Before buying the property sit down with your contractor and discuss the estimated time needed to repair the home.  If necessary, ask the contractor to break the job down into rooms and develop a timeline.  This will help you and the contractor stay on pace to finish the work and get it back on the market.

Your goal as a home flipper is to find a home at the right price that you can turn around and sell for a profit.  Don't fall in to the trap of these mistakes and don't get too attached to any home.  Always be ready to simply walk away from a potential deal and look for a new one.

Many people ask me whether we made a mistake in our company name, Short Sail Solutions. The answer would be no. Short Sailing is to signify completing a short sale like a short sail (sail –> breeze -> streamlining a short sale).

Short sales have certainly become more streamlined mainly due to a national increase in understanding the process and nature (lenders, servicers, buyers, sellers, and agents) of short sales and also through the contribution of government intervention and policy changes in government sponsored enterprises. However, short sales are still a challenging task and in order for homeowners and agent’s to minimize problems and maximize results, let’s explore 8 ways on how to streamline your Short Sail.

*Information from agbeat.com & kcmblog.com

1. Setting Expectations. Set expectations prior to starting the short sale. Thoroughly understand the situation and the objectives. Clearly define what the short sale process will entail and the motivation and cooperation it needs to get one completed.
2. Collect short sale package documents at the listing appointment.
3. Title examination. Have the title officer run a Statement of Information/a preliminary title when the listing is taken.
4. Accurate and on time document submissions. Make sure you submit all requested documents to the lender/servicer on time.
5. Communicate often with all parties. Keep the lender/servicers and all other parties satisfied by following up with them and making sure everyone is on the same page. Keep pressure.
6. Meet the BPO/appraiser at the inspection. Make sure they are obtaining an accurate value of the listed property. Having to deal with value disputes after the inspection can delay the sale.
7. Escalate to higher authority when needed. If you don’t already have a designated person you work with within each bank, make sure you are escalating to a higher authority to help you move forward.
8. Be organized. A short sale involves a lot of documents. Make sure they are organized or my recommendation is to use short sale programs that are available to help you organize all docs online.

Short sales can be a breeze if you continue educating yourself on how to do it. We are based in Washington State. Let us know if you have any questions or comments by writing them below or email me at Peter@seattleshortsaleblog.com

Hope this helps

Peter