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Rookie mistakes when flipping a home.

With mortgage rates still at all-time lows and lots of homes available at prices below market, many people are turning to real estate investment for the first time.  In order to be safe, new investors often start out with flipping homes instead of holding a property for its rental value.  Here are some of the top mistakes rookies make in home flipping and how to avoid them.

Not Allowing Enough for Repair Work

This is usually the biggest mistake made by new investors.  People who have never renovated a home often underprice the repairs needed to make the home attractive enough to sell.  This is why seasoned investors recommend that new investors talk to a contractor BEFORE placing a bid on a home.  Getting a good price upfront will help determine if the house is worth the purchase. It is also wise to add a bit of cushion for Murphy's Law for things that just go wrong for no reason.

Allowing Emotion to Let You Pay Too Much

Some investors find the “perfect” home and go full steam ahead with the purchase.  They find a home with a discount in a hot area and they just KNOW that they can sell it for a quick profit.  This is where cold, hard facts should take the lead, not emotion.

An investor should never, ever buy a home for anything more than 70% of the home's repaired value.  This is a rule of thumb that has been used by many investors for years and it has served them well.  Paying more than the 70% will lead to smaller profits or even a loss.

Trying to Do Too Much

Many new investors envision themselves remodeling the bathroom, adding new paint and then finishing up the front lawn in a few weeks and then, voila, the home will sell.  However, it is best to let the pro's handle the tough work.  Repairing or remodeling a home can require some or all of the basic contracting skills such as carpentry, plumbing, masonry, painting and electrical.  It is simply too much of a daunting task to try and do all of this on your own unless you have considerable experience in these areas.  Even if you can do it all, wouldn't it be better to hire someone to do this type of hourly work while you search for the next deal?

Taking Too Long for the Repairs

Each month that you own a property is another month of expenses for items like utility bills, insurance and property taxes.  This can eat in to your future profits and may even cause yourself a loss.  Before buying the property sit down with your contractor and discuss the estimated time needed to repair the home.  If necessary, ask the contractor to break the job down into rooms and develop a timeline.  This will help you and the contractor stay on pace to finish the work and get it back on the market.

Your goal as a home flipper is to find a home at the right price that you can turn around and sell for a profit.  Don't fall in to the trap of these mistakes and don't get too attached to any home.  Always be ready to simply walk away from a potential deal and look for a new one.

Sometimes the differences between your employees and independent contractors seems negligible. Their work may be the same and theirsalaries almost indistinguishable, but regardless of whether you seesignificant differences among the people you pay, there is someone whodoes: the IRS.

With employees, companies are required to withhold and pay certain work-related taxes like income, Social Security, Medicare andunemployment. With independent contractors, they aren’t. In fact,companies are only responsible for filing one form (1099-MISC) forcontractors, and that's only if their salaries exceed $600. If a companymistakenly classifies an employee as an independent contractor, itfaces a load of paperwork and penalties and is generally held liable foremployment taxes and then some. So it's important to carefully
distinguish between your workers and your independent contractors.

Remember these qualifications of contractors so you can stay out of trouble with the IRS, an agency not generally known for its forgiveness:

1. They provide their own training.
   Independent contractors already have experience in their fields and require no specific training from employers.
2. They have control over the means of accomplishing their work.
   They can decide when, where and how the work is done. They don't have tofollow any instructions, and the only control the employer has over thework is the end result. Keep in mind that sometimes employees may seemto fit this description, but in this case the company still maintainsultimate control of the situation; with employees, an employer canchoose whether to exercise that control.
3. They have control over their salaries.
   Independent contractors decide how much their work is worth. If you are paying oncommission or by the job — or any other way other than on a fixed,periodic basis — you are probably dealing with independent contractors.
4. They can only be fired for a breach of contract.
   You cannot fire contractors because of general cutbacks or poor work ethicthe way you can fire employees. Generally, you can only fire them forbreaking contract stipulations.
5. They cannot terminate their relationships with employers at will.
   Conversely, independent contractors are usually contractually obliged to finish ajob, and they can be held liable for failure to do so.
6. They have their own tools.
   Independent contractors will always rent or use their own tools. However, so do manyemployees in certain trades, like painters and plumbers, so it's bestto consider the personal costs of the equipment. If these these toolsrequire a significant investment and expensive maintenance, you'reprobably working with an independent contractor.
7. They have to pay for all business and traveling costs.
   Like their tools, independent contractors are responsible for their businessand traveling costs, so if you don't foot this bill, you can reasonablyassume that you are not working with employees.
8. They run the chance of making a profit or incurring a loss.
   If the worker carries the risk rather than the employer, the worker is anindependent contractor. He or she has the responsibility of balancingequipment costs, delays, operating costs and the like with the salary
   being paid, hoping to come out on top.
9. Their services are available to the public, and they usually have multiple clients.
   If workers are offering their skills to anyone and everyone, they areprobably independent contractors. They are not bound to companies theway employees are. They strive to get as much business as possible, andthey do so by taking on as many clients as they can. Because of this, acontinued relationship with a single organization, though possible,usually does not exist.
10. Your company has no control over the contractor's assistants.
    If your company hires, pays or supervises any assistants helping a worker,that worker is an employee. Contractors take care of their ownassistants if they use or need them.
11. Oral and/or written reports are not required.
    Companies only exercise this control over employees. Independent contractors areunder no obligation to provide the company with any updates of theirprogress or anything except the end result the two parties agreed upon.
12. Their services are not completely integrated into your company.
    Chances are the work performed by an independent contractor will not becritical to your business as a whole. The more crucial their servicesare, the more likely workers are employees.

Knowing how to distinguish your employees from the independent contractors you hire allows you to maintain the upper hand in workerrelationships by knowing where your organization does and does not havecontrol. Plus, this knowledge can help you be completely prepared foryour employment-based taxes, so that not even those formidable IRSagents will be able to bring you down.

Hope This Helps