In today’s housing market, it can indeed be a stressful experience to consider flipping your first home. The area of real estate investing is one where many have ventured into, but many have also failed at. And there’s a reason: with building permits, property expenses, construction costs, and competing buyers, house flipping can be a risky effort.

It’s not enough to go by the old phrase “buy low, sell high.” A custom home builder Princeton, NJ would advise you to take your time and look at an extensive amount of property information available to you in your area, for instance.

If you’re looking into flipping your first house, there are multiple mistakes that you’ll need to avoid when looking at the purchase and resale of properties–and several areas that can help you in your house flipping journey. Here are five tips that can help when deciding how to flip houses.

Start Off Small

When getting into anything for the first time, you never want to start off too big. Flipping homes is no different. You might find what looks like the perfect investment opportunity with a home that costs just a bit over your budget, but construction add-ons, repairs, and getting the help of a real estate agent all amount to additional costs that will come out of your pocket.

If you’re looking at the first home to flip, we recommend that you start off with a single-family home that’s within your budget. The average amount that people who flip homes go by is what’s called an Average Repair Value (ARV), the amount you can sell the house for after subtracting the complete amount of renovations and repairs. The ARV that experienced house flippers go by is 70%. To use an example, this means that if a home’s ARV is $200,000 and you need to do $40,000 worth of repairs:

200,000 x 0.7 = 140,000.    140,000 – 40,000 = 100,000

From this calculation, this means that your budget should be $100,000 for your house flip in this example.

Choose a Home with Low-Cost Improvements

Looking at a house that might need “just a little” added construction may seem like a great investment at the start when getting into flipping a house. However, make sure to take a closer look at the interior. Does it need new piping? A new electrical system? New roofing and siding? You may want to check on these factors first, because too many repairs may add up to additional costs that affect your budget.

If you’re deciding on flipping a home that might need an extensive amount of additional construction, then it may take more investment than what’s logically possible. That means less profit for you when making the house flip, and possibly little to no profit. Remember: the end task here isn’t to over-improve the property, but to get a return on your investment

Make the Right Amount of Additions

Balance is everything when it comes to flipping homes. Extensive improvements like roofing, electrics, and foundational construction can take a huge amount of time and cost you more money than the property may actually be worth in the end. However, don’t be afraid to add on renovations to the home if they are needed, as a home that is under-improved likely won’t be bought by a prospective buyer.

Cosmetic improvements such as flooring, paint, and carpeting can add a new style to the surroundings. Upgrading the walls and ceilings can make the house look modernized. Meanwhile, making sure the home has the latest in heating, air conditioning, and appliances can be a winning strategy that lures the buyer into making a home purchase.

Do Research on Your Market

Even if you find the perfect house, it is within your budget, and have the very best improvements made, you need to have knowledge of the real estate market and neighborhood in which you’re trying to house flip. Do you know the local construction laws? Do you have the required permits for added renovations? How about zoning? The last thing you want is for your house flipping project to be delayed due to information that you could have acquired.

Price It Right

So you’ve bought the right home, made the perfect additions to it, are on point with your real estate knowledge (or hired an expert). Now you just need to put a price on it and it’ll sell, right?

Not so fast. You’ll want to be careful not to be too hasty with overpricing your home, as customers can be turned away if they see a home that is priced too high. Do careful research on what similar homes are priced at in the area. Pricing your home slightly lower–and at the right amount–can make your home receive more offers, helping to sell it more quickly.

Flipping homes can certainly be a risky investment. However, with the right research, effort, and knowledge, we’re confident that you’ll be successful in your first house flip.

About the Author:  Jennifer Bell is a freelance writer, blogger, dog-enthusiast, and avid beachgoer operating out of Southern New Jersey.