There is no question that you can make significant amounts of money buying, repairing, and reselling homes. However, it takes knowledge, time, and careful planning to make maximum profits in a minimum amount of time, and if you make a mistake along the way, it can make a big dent in your bottom line.
1. Buy wholesale
The first step to avoiding costly mistakes is to arm yourself with as much knowledge of your target area as possible. You need to know the final sale price of a property BEFORE you even think about making an offer. Think of yourself as a retailer, buying as close to wholesale as possible, then selling to retail once the job is complete.
2. Estimate accurately
Whether you do the repair work yourself or hire, in addition to knowing how much the home will sell for, you’ll need to have a clear idea of how many repairs a home will require and how much those repairs will cost. This can be a big mistake if you don’t estimate repair costs as accurately as possible. Of course, you’ll find surprises along the way, but if you added a certain percentage of “cheating factor” into your estimate, those surprises shouldn’t be enough to wipe out your gains at the time of sale.
3. Plan ahead
Once you start to seriously consider buying a home, another big mistake is not to start getting your contractors to line up quickly and do the work that will be required for the resale. Beginning investors often wait until closing to start lining up their contractors, only to find they are already booked for other work and won’t be able to get to their project for weeks or months. As soon as your sales transaction has gone into escrow, get on the phone and start mobilizing your home renovation team. That way, you’ll be ready to go to work as soon as the sale closes, putting more money in your pocket through faster resale.
4. Compare prices
Another common mistake that can hurt your overall bottom line is not buying much of your materials. You may have to hire contractors to get the job done, but that doesn’t necessarily mean those contractors will be looking for the best buys on things like paint, appliances, fixtures, carpeting, and all the other materials and supplies that will be needed to update and repair a home. for resale. You can save hundreds or even thousands of dollars by purchasing materials instead of just buying them or having your contractors buy them.
5. Examine the work
Finally, another common mistake, especially if contractors do the work, is to simply let a project continue without constantly monitoring its progress. That means giving up your weekend plans for a while to work on the property or monitor how your contractors are doing.
Remember, buying, repairing and reselling homes is a business and requires just as much business sense and attention to detail as any other business venture. Avoiding common mistakes like the ones we’ve mentioned can add thousands of dollars to your bottom line on each property.