Find the best areas to flip houses in Philadelphia and you can generate an even greater return on investment. We have several neighborhoods with a lot of house flipping going on. Demand is strong for rental properties and starter homes, and it’s not like were running out of fixer-uppers. You can succeed as a house flipper in Philly. But if you make one of these three big mistakes your flip may flop even in the best areas to flip houses in Philadelphia.
Pay too much for your fixer-upper
If you’re not careful with your comps and you end up paying too much money for a distressed house, you’re flip is doomed before you even get started on the rehab. There are many ways house flippers can end up paying too much for a house.
Don’t fear rejection. If you’re getting a lot of leads on houses, expect a lot of your offers to be rejected. You’re not looking for a date for the prom and you don’t have to get desperate. Hold out for good deals. The best flippers buy houses significantly below market value.
You’re not shopping for your next home for your family to live in. Don’t get emotionally attached to houses. Look for houses you can fix and flip. Period. Before making any offer on a distressed house, run your comps. If the housing market is cooling, you need to stick to the most recent comps.
When you’ve calculated your maximum offer, why not see how much less you can offer in order to close the best possible deal?
Go way over budget on your rehab
Every dollar you go over on the rehab is a dollar you lose from your profit. Just breaking even on a flip is not really breaking even; it’s a huge loss. If you need to get a grip on rehab costs, the best resource is The Book on Estimating Rehab Costs by J Scott (updated in January 2019). Another option is to line up a contractor to work for you or partner with you and have them help to draft the scope of work and the rehab estimate.
Run a flip on narrow margins
In a hot housing market, you can get away with some mistakes, especially if you give yourself a little margin in your plans, like adding an extra $2,500 onto the rehab estimate. But one of the biggest mistakes flippers make in a cooling housing market is working with the same margins they used in the hot market. It’s time to widen your margins so definitely add an extra $5,000 to your rehab estimate. When calculating your purchase offer, test to see if the deal still works if your ARV drops by 10%—that’s possible on a rehab that takes six months when the market is cooling.
Summary
These are three mistakes you really cannot afford to make even in the best areas to flip houses in Philadelphia.