You can make a lot of money by flipping houses, but you need to understand and mitigate the risks associated with these investments. If you are new to the fix-and-flip investment strategy, these tips should help you get started.

Evaluate Your Skill Level

If you are a licensed contractor, you can probably handle most of the renovations yourself, or you know people who can. However, whether you are a contractor or not, you need to conduct a thorough evaluation of your current skills. You can learn along the way, but this process can be costly because it delays your completion date, increasing your carrying costs.

Also, as an investor, your primary job is to find investment properties. You should have a team of highly skilled workers who can handle the renovation unless you plan to work on one house at a time.

Do Your Due Diligence

Before you invest in a single property, do your due diligence. Have the home inspected, and consider bringing in an engineer to check the structure, especially if you plan to make major changes to internal walls. Compare the home price and your renovation costs to the average sale price in your area. Make sure you understand your carrying costs and how they impact your return on investment. Get an accurate renovation quote based on your plans.

Consider the Neighborhood

The neighborhood your home is in can significantly impact your resale price. Therefore, you need to know the average and top end of the market. Then, you should plan your renovations based on this amount. It’s easy to go overboard and create the “perfect” floor plan, but this can price you right out of your market.

Look for undervalued homes in neighborhoods that have high selling prices. Also, consider the school district, demographics, neighborhood upkeep, and buildings or homes that are eyesores near your investment property. Consider noisy dogs, transportation noises, and other factors that could devalue the home.

Build a Great Team

Your team should start with a great mentor who can show you the ropes and give you advice on your projects. However, you also need to find a realtor who understands the local market and the types of properties you are interested in. You should also have relationships with engineers, inspectors, and local officials, especially those in charge of zoning. You may need a real estate attorney and tax accountant as well. Don’t forget a reputable, licensed contractor.

Be patient as you learn the ropes so that your fix-and-flip journey is a successful one.