Fix-and-Flip Pitfalls to Avoid

Fix-and-Flip Pitfalls to Avoid

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hard money lender in Los Angeles

There is no doubt that fixing and flipping homes in and around Los Angeles can be extremely lucrative…when done properly.  Unfortunately, some people get into house flipping without engaging in the necessary due diligence and put themselves in a difficult position financially.

Pitfall No. 1- Not Properly Analyzing the Potential Value of the Home

If you think you can purchase a dilapidated home, install some granite counter tops, slap on a new coat of paint and that will double the value of the property, you are probably mistaken. There are specific renovation projects that are much more likely to generate a larger return on investment than others. When you are applying for a loan with a hard money lender in Los Angeles , you need to provide a realistic analysis of the current value of the home and the projected value once renovations are complete.

Pitfall No. 2 – Neglecting a Review of the Neighborhood “Comps”

Obviously, it is extremely important to make the purchased property appealing by completing the necessary renovations, but you also need to be cognizant of the comparable home price listings, and recent home sales, in the respective neighborhood. This is important because you do not want to list the home at a price point that is exorbitant and unlikely to garner much interest from buyers in the area.

Pitfall No. 3 – Failing to Have the Necessary Contingency Funds

When purchasing a property to fix and flip, you need to make sure you have sufficient funds to cover the purchase price, the cost of repair, and the expenses associated with listing, selling, and closing on the home sale. Even if you intend to try and save some money by doing some of the work yourself, you would still need to include the cost of materials and tools in your overall expense calculations. It is also recommended that you have a contingency fund for unexpected expenses. You could call this a “stuff happens” fund to make sure you are not placed in dire financial straits if, for example, a contractor discovers mold in the home or the home needs completely new electrical wiring.

Pitfall No. 4 – Not Accounting the Actual Amount of Time Needed to Complete the Renovation

Like most home renovations, it will take time for the work to get done. Going into the project with a clear timeframe will help keep one from encountering financial challenges. In addition to taking into account the time needed to complete the renovations, you should also keep in mind the amount of time it will take to actually sell the home.One may be under the impression that the renovated home will most definitely sell quickly, but the California real estate market is unpredictable; thus it is imperative to be prepared.

Have Questions? Contact PB Financial Group, the Reputable Hard Money Lender in Los Angeles, Today 

These potential pitfalls should not deter you from pursuing a fix-and-flip project if you have done the necessary due diligence and are looking to work with an experienced and reputable hard money lender in Los Angeles . At PB Financial Group Corp, we have been providing quick funding since 2006 and have funded over 2000 hard money/private money loans over the years. For further information or to schedule a consultation, please contact PB Financial at 877.700.3707  or visit www.CalHardMoney.com to learn more.

PB Financial NMLS #357614/DRE #01522495

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Pouyan Broukhim

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