House flipping is buying a property, spending some money renovating it, and then selling it at a profit. It is sometimes also called “fix and flip.” It can be a lucrative practice when done right, but it is not without its pitfalls and challenges. In this article, we will look at some practical tips you can apply to make a success of it.

1. Have a clear budget

Not having a budget when doing a “fix and flip” is like having no plan. You need to know what property you are looking for and in what price range. Additionally, you need to know what your budget is for renovations.

2. Know your desired sell price

This ties into Point 1. You need to know your desired sell price and work backward from there. This way, you can minus the cost of the home and your budget for renovations and see what a feasible profit would be on the deal.

3. Add extra to your budget

Whatever budget you have determined in Point 1, add an extra “buffer” to that. With house flipping, your budget will likely be more than you bargained for. No matter how much due diligence you do before the deal, something unforeseen is bound to pop up. By adding some extra “fat” to your budget, you can plan for these unforeseen expenses.

4. Negotiate hard

Your best chance at making a good profit is to buy a property at a good price. If you cannot get a good deal when purchasing your property, your renovation ideas will not make up for it. Conversely, if you pick up a property at a great price, your renovations do not need to be perfect, and you will still likely make a profit.

5. Get a professional inspection

In your efforts to save costs, be careful not to overlook a home inspection. Even if you think you are experienced enough to pick problems up, a second set of eyes is crucial. If you ignore a professional inspection, this can cost you more money down the road.

6. Don’t over-renovate

Although renovations can add value to your property, not all of them do in the same measure. You need to know where and how to renovate to produce the best ROI. Also, properties do not rise far above the value of those in their neighborhood. This means that you will reach a certain “threshold” where renovations are no longer adding value but costing you money you will not get back.