Doug Kleinsmith Cautions Against When Flipping Houses

COVID-19 shut down many businesses. But, it also opened the door to many new homes. The pandemic forced homeowners inside; being locked inside space became a premium. As the housing market took off, so did the rise of first-time flipping. This opportunity created an increase in both flippers and renovators looking to turn a profit. They were riding the wave. However, now it’s crashing back down to earth.

 

With prices inflated and supply limited, these same builders who capitalized on the boom are left struggling. Flipping houses already carries risk. With margins and demand even tighter than normal, it’s essential to avoid mistakes. Businessman and experience flipper Doug Kleinsmith encourages both beginners and professionals to look out for these five pitfalls.

 

The first step should always be financial planning. This isn’t a hobby. Money is essential in an effective flip. Generate a budget based on the market, the project’s location, and any related costs to acquisition and renovation. Include additional fees for holding the property and unaccepted expenses that will likely pop up. Most importantly, stick to this budget. Avoid over-spending. Businessman Doug Kleinsmith is advocates a disciplined approach. If the property is over budget, get out. It’s time to cut your losses.

 

When it comes to the budget, over-rehabbing and completing unneeded work is the most common extra expense that hurts your budget. The goal is to attract both buyers and profit; this drives any improvements. The luxury finishes you chose may look nice, but avoid the impulse to over-fix. Your project should reflect comparable homes in the neighborhood.

 

Flipping a house also consumes more time than any other real estate development. Timing is critical. Doug Kleinsmith has grown two significant businesses, and he points out the importance of time management and juggling multiple tasks. Even if you’re hiring contractors, time is required to coordinate and schedule. Closings, renovations, inspections, listings, and showings all require time. Be aware that delays will always occur and plan accordingly.

 

Flipping isn’t as easy as it seems. Labor is often the first place developers try to cut expenses. But, they often lack the knowledge and skills. Doug Kleinsmith is proud of his work ethic and financial discipline, but he also isn’t too confident to not seek help. For Kleinsmith, surround yourself with people who can help your project grow. If it doesn’t come naturally, now is not the time to learn. Hire help.

 

Finally, have a viable exit strategy. The house isn’t done until it is sold. As important as setting a budget, flippers need to have an exit strategy. Whether you are leasing, renting, or selling, a plan is required to monetize your project. Develop multiple strategies at the beginning, so you can adapt quickly if needed.