House flipping is a very profitable business, but it is not as easy as it looks on TV: find a house, buy it, do some repairs, then sell it. There are risks associated with house flipping that if you do not take careful steps, it can be financially disastrous.

If you have the knack for spotting homes with potential for generating huge profit, but most homebuyers dare not take a second look, here are some tips to help you get started.

What is house flipping anyway?

House flipping, according to Investopedia, is a real estate investment strategy that involves purchasing a property with the purpose of selling it for a profit.

In 2019, the number of homes flipped out of all homes sold reached an 8-year high at 6.2 percent, according to data from ATTOM Data Solutions.

That number translates to an increase from 5.8 percent recorded in 2018 and 5.7 percent in 2017.

First-time House Flipping Mistakes You Should Avoid

House flipping is not for everyone. Apart from having the perseverance and the right connections, there are common house flipping mistakes you need to steer clear from.

Not Considering Your Budget

Your commodity as a house flipper is, of course, the house, and that does not come cheap--even if it is in the best condition. Many first time investors make that mistake of diving in this type of real estate business without understanding all the costs involved in the acquisition of a house.

Some of the costs involved include renovation costs, insurance and utilities, and marketing. And if you choose to fund your venture through financing, then remember that such comes with interest as high as 18 percent.

READ MORE: Fees and Other Associated Costs You Need to Know Before Buying a Home

Failure to Understand the Market

Before you enter the house flipping business, you need to have a full understanding of the housing market. You may find it hard to sell when the market gets bad. And if you don't know when to exit and cut your losses, you may end up draining your financial resources.

As there will be renovations involved, you also need to know the applicable zoning laws and building codes, as well as tax laws in the area.

Being Impatient

As with any real estate investment, patience is essential. Instead of relying on contractors for quick renovations and realtors for the house selling, you can try doing repairs and selling the house yourself to minimize cost and maximize your profit. If you need help with the renovations, work with a reliable contractor.

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Lack of Time Management

House flipping will require much time from you. Most of the time, finding the right property to buy, renovate, and sell can take months. And if you still have a day job, you may find that your time to do the fixes not enough.

While hiring contractors may be more convenient, you will still need to invest time to oversee the work being done, and the costs will also cut into your profit. Even when repairs are done, there are still lots of activities that need to take place and paperwork to be done before you can close a deal with a buyer.