In Miami and throughout Florida, there are many incredible opportunities to fix and flip real estate. But if you are just getting into fixing and flipping, it is important to know what pitfalls to avoid in the process. That way, you can streamline the process as much as possible and maximize your return on investment.
Below are some common fix and flip mistakes beginners make. Just by steering clear of these pitfalls, you are more likely to be successful with your venture.
Guide To Avoid Fix and Flip Mistakes
- Paying more than you need to when purchasing a property. For fixing and flipping to be worthwhile, you need to know how to identify a property that could perform well in your market. Estimating what it will sell for after you rehab it involves assessing its After Repair Value (ARV). But you also need to be able to buy it for a price that is reasonable. You are going to turn around and sell it for more after you make your upgrades and repairs, but the difference needs to be significant enough for the time and effort to produce a substantial return on investment. A lot of new investors are eager to jump into their first project and may get tired of waiting for the right opportunity to come along. As a result, they may shell out more than they should when buying a property to fix and flip. Be patient, and the right opportunity will present itself.
- Budgeting too little to rehabilitate the property. Never walk into a fix and flip project without an itemized list of rehab costs. If you do not have a detailed breakdown of your potential costs, you are likely to underestimate how much money you will need to fix up the property.
- Over-leveraging on your project. Another common mistake that novices make when fixing and flipping is borrowing too much. While you should err on the side of caution when taking out your fix and flip loan, there is no reason to borrow far in excess of your requirements. Doing so will simply add to your expenses.
- Skipping property insurance. You want to repair and sell your fix and flip property quickly. So, you might not think that property insurance is necessary. But think about your potential losses if something were to go wrong before you finish flipping your investment if it is not insured. Indeed, in Florida in particular, we can get some pretty harsh weather each year. So, it is extra important to make sure your property is protected while you are making your improvements.
- Doing more work than is necessary. When fixing and flipping property, your goal is to maximize your return on investment. The money you spend purchasing the property and rehabbing it is part of your investment, but so is time and effort. At some point, you may run up against diminishing returns. The increases to the property’s value may start to decline relative to the amount of work you are putting into it. When you hit that point, it is best to resist the urge to continue making improvements. Just sell the property and move onto your next project.
- Not asking for multiple quotes. When starting out, you might be tempted to just go with the first contractor you talk to for each aspect of your project. It is understandable you might feel overwhelmed with the many steps that go with a fix and flip project. But taking the extra time to get multiple quotes from contractors can pay off significantly. While you are at it, do not forget to look into the backgrounds of each. Don’t take their word for it with respect to licensing; look up the information yourself. Also check out their portfolios and call their references.
- Not working with an experienced fix and flip mortgage broker. One more mistake to avoid when fixing and flipping real estate in FL is to choose the wrong mortgage company. As a fix and flip investor, you have a tight schedule you are working hard to meet. Any unnecessary hassles or delays will make it hard for you to keep up with your timetable. A company that does not usually handle fix and flip loans may not be able to keep pace with your needs. A broker that is experienced with fix and flip loans will be able to rapidly match you with a loan so that you can stay on track with your project. Not only that, but a broker with a large network will be able to find you a competitive mortgage. That way, the costs of your investment are lower and your return on investment is higher.
Apply Now for a Fast and Flexible Loan to Fix and Flip in Florida
Are you ready to get started with your fix and flip project in Miami or anywhere in Florida? Lending Bankers Mortgage can connect you with fast, transparent, competitive financing for your investment. To get started now, please give us a call today at (786) 220-1100.