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You are here: Home / Investing / 4 Mistakes That Can Harm Your Real Estate Profits

4 Mistakes That Can Harm Your Real Estate Profits

January 27, 2022 By Bobby | This article may contain affiliate links. For more information visit our Disclosure

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4 Mistakes That Can Harm Your Real Estate Profits

Whether you have bought a house with the express purpose of “flipping” it, or you are remaking your own house in preparation to sell up and move somewhere else, decisions on a remodel have to be run through a reality check. A single decision can knock potentially thousands off the sale price, or add just as much if you get it right. So when it comes to planning out a remodel, it’s important to have some guiding principles.

It doesn’t matter much what you like

Let’s get this blunt statement out of the way. Unless you’re at the very top end of the market, individualism really isn’t that much of a selling point in real estate. Sure, thoughtful little touches can make a difference, but there is nothing to be said for making additions just because you like them. You’re not going to be selling the house to yourself, and while you do want the house to stand out from the crowd it’s best to do that with quality. If you’re telling yourself “the right buyer might really love holographic wallpaper”, then bear in mind that “the right buyer” might be in another city or country altogether and never see your property.

“Money-saving decisions” can end up costing you more

The profit in a flipped house comes from taking property at a low price, then adding value through remodeling to the point where you can sell it at a high price. There’s an understandable impulse to keep the costs of the remodel low so that the profit will be higher, but this is often a false economy. A remodel that is cheap will usually look cheap, and buyers are unlikely to spend big on it. You should certainly control the costs of a remodel but, unless you are fortunate enough to get a great deal on materials or labor, it’s realistic to accept that your budget will be higher than you’d want it to be.

Think carefully before taking something out

While profit should be a guiding principle, the temptation to remove elements from your property is one that should be approached with caution. You may prefer simplicity in your home, but the thing that you take out to make the job easier might be the thing that would sell the house. Take as an example the bathtub. You may rarely or never use it. A potential buyer, however, might love a relaxing soak every so often. If you need to save space in the bathroom, check out bathroom CAD design options that can make better use of lines and angles rather than getting rid of the tub. On balance, the bath is more valuable than the space.

Don’t tell yourself you can break the ceiling price

House prices tend to cluster by area – the upper limit you can expect to realize through a sale is generally dictated by what the home is near to, and this “ceiling price” is hard to break. If you want to sell the finished home for $200,000 and no house in the area has fetched over $180,000 before, then you’re going to struggle to get buyers to pay that, no matter how great a job you can do. You may believe you can be the one to break through that ceiling – and you might, by about $5,000 – but you’re not going to shatter it, so if your profit depends on far exceeding what other houses are going for, forget it.

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