4 Mistakes to Avoid When Flipping a House

Flipping houses has become an appealing investment strategy in Canada’s competitive, expensive market, but here’s what you should make sure to avoid when making this big financial decision.

Not enough time to complete it. First you have to take the time to find an ideal property in the location you are after, which could take months. Then you have to completely renovate it, which could require an entire gutting of the home. Once that’s done, you have to schedule inspections to make sure everything is up to code before you can even begin to start the selling process. It is a full-time job in and of itself—so make sure you get a good financial return.

Running out of money. Real estate is incredibly expensive in most of the desirable Canadian markets. You need a significant chunk of change up front in order to flip a house. First you have to buy the property, and then you will be paying interest on it while you are fixing it up. If you can pay cash up front for the property, you can avoid the interest, but you will still have taxes and fees you will need to recoup in the sale just to break even. You will also need money for the renovation itself.

Lack of knowledge of the property and neighbourhood. If you buy a foreclosure property in an already affordable market, do you expect to flip and sell it for much more than other properties in that market are selling for? You can put a lot of money into making it a dream home, but if it’s in a neighbourhood that doesn’t sell for more than $200,000, don’t expect to sell it for $350,000. Using a good agent will help you find the best market and the correct property to invest your time and money in.

Lack of required skills to complete projects properly yourself. Hiring a team of professionals to renovate the home will be easier than doing it yourself, but it will likely reduce any profit you make. The real value in flipping a house is in sweat equity. If you don’t enjoy, or are incapable of, doing it yourself, you might want to avoid this business venture all together. That said, if you’re good with a hammer and enjoy fixing things, taking the time to flip a home can be a solid investment that will pay off.