House flipping in Andover sounds like a basic idea: acquire a bargain property, carry out some remodeling, and then sell it for a much higher price. There is no doubt that house flipping has provided several returns to many investors across the country. But flipping houses also involves a high degree of risk; a flipping project can instantly transform into a nightmare if you aren’t equipped. If you’d like to try your hand at flipping houses, avoid these common pitfalls, or you might find yourself in a real flipping nightmare!
Over-Improving the Property
Not knowing how much to improve the property is one of the most common mistakes that can easily turn a house flip into a nightmare. As an illustration, new house flippers usually go too big in renovations, spending far more than needed. Overspending can lead to budget problems and missing out on profits when you sell. Unless the property you bought is in a very high-end area, it is not required to go too upscale. The best improvements will bring the property up to the level of the other homes in the neighborhood – but not too much beyond that.
Dealing with Property Damage
One more way that a house flip can become a nightmare is if you encounter vandalism, theft, or property damage. If a property has been sitting vacant for an extended period will be particularly vulnerable to this issue. House flipper Carol Sankar of Charlotte, NC, describes one project in which the home was burglarized multiple times during the remodel. One day near the end of the project, she walked into the house to discover that the kitchen cabinets had been stolen right off the walls. A dishwasher and a refrigerator were also gone. Because the property was in an area with few security measures and a low police presence, there was little Sankar could do to re-claim her stolen materials and appliances.
A third situation that can make a house flip haunt you is when making expensive financial missteps. For example, house flipper Daniil Kleyman in Richmond, VA, procured a project house for what he thought was an awesome deal. An experienced investor, he did a preliminary market assessment on the property and projected to be able to remodel and sell it for five times his cost. Unsuccessfully, Kleyman made a series of mistakes that led to losing money on the flip.
Not only did the first contractor he picked walk off the job with his money and not finish the work he was hired to do, but Kleyman had also used the wrong comparable properties when estimating his post-remodel sales price. He had to list the property for far less than he had intended. And then the property was burglarized, stripped to the walls, plumbing broken, and flooding in the basement. After restoring the damage and replacing the stolen appliances and fixtures, Kleyman was eventually able to sell the house at a loss to a buyer who was not enthusiastic.
Avoiding Flipping Nightmares
Stories like these showcase a few of the challenges that come with flipping houses for resale. These investors would have reaped significant rewards from having accurate market data, proven construction professionals, and the expertise of property management professionals from the start. In Kleyman’s situation, particularly, by first communicating with an industry expert like Real Property Management First Choice, he would have provided a detailed market assessment before buying the property. He would have known the property’s market value from the start, which may have caused him to alter some of his decisions later.
A professional Andover property manager would have also provided Kleyman with the names of trusted remodeling and repair vendors in his area and would have checked in with those vendors periodically, greatly reducing the chances that the contractor he hired would take his money and run. Finally, the team would have accurately priced and marketed his new property for him, finding quality tenants ready to pay a competitive monthly rental rate for as long as Kleyman wanted to keep the home. The value of this information and assistance is difficult to overstate – it could mean the difference between a successful house flip and a flipping nightmare.
With local property management on your investment team, you’ll have the aid of experts dedicated to making every one of your properties one of the best long-term investments you can make. For more information, contact us online today.
Originally published on July 12, 2019.
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