Flipping houses is hard work. Sure it seems relatively easy to do—you buy the home at a lower price, fix it up, and sell it off for a profit. Short and sweet at the surface, but in reality, there is a veritable laundry list of factors to consider first.

For one, there’s the potential to make a lot of money, which is the main reason most people get into the game. However, flipping houses involves just as much risk that could ultimately lead to you losing large sums of money fast. Even the best Realtor will tell you there are more pitfalls and hazards than you can possibly imagine, each one ready to strike when you least expect.

Before you buy your first house to flip, you’ll want to avoid common mistakes amateur flippers make as well as gain a full understanding of the process so you know what you’re getting yourself into.

1. You Need a Lot of Cash

Naturally, you’ll need money for a down payment and other fees associated with buying your new investment property. Additionally, you will need large sums of cash in order to pay for a wide range of expenses like renovations, redecorating, staging, and carrying costs (how much you’ll pay each month to own and maintain the home until you sell it).

You will undoubtedly need all of these expenditures to get the home ready for sale. Yes, if you have a credit card with a high limit you can certainly charge these costs, but then those interest payments will eat into your profits. Without cash on hand, you’re going to have a tough time conducting any kind of business trying to flip homes.

2. You Need Good Credit

Along with available capital you’re going to need an excellent credit score. That will help you secure any additional funding you need through loans, a second mortgage, or even a home equity line of credit. Home loans have become tougher to be approved for as of late and lenders are becoming increasingly wary of giving money to clients who are looking to use that cash to flip houses.

The best way to make banks and other private lenders loosen up those purse strings is to demonstrate your responsibility with money. A high credit score is the best way to do it.

3. How Does the House Look?

What condition is the house in? How much work needs to be done? Are the renovations too costly to make enough of a profit flipping the house when you’re finished? These are all questions you need to ask yourself before you commit to a purchase.

4. Tour the Home

Too many house-flippers have embraced the Internet in their search for homes to buy and sell. The problem is, viewing a home online is much different than seeing it in person. It is crucial you actually go and tour any home that you are considering buying. That way you can view every last flaw and imperfection before you commit.

5. Analyze the Value

Top real estate agents will tell you that the price tag on the home must be lower than the market value in order to make it worth your time and money. Otherwise, you’re not going to get much, if any, return on your investment once it’s ready to sell. That’s why you want to locate the worst home in the best neighborhood, because the value will only go up, instead of buying the best home in the worst neighborhood.

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