House flipping in Semmes sounds like a simple principle: get a bargain property, do a bit of remodeling, and then sell it for a much higher price. There is no denying that house flipping has contributed huge returns to many investors across the country. But flipping houses also involves a high degree of risk; a flipping project can quickly become a nightmare if you’re unprepared. If you choose to try your hand at flipping houses, avoid these typical blunders, or you might find yourself in a real flipping nightmare!
Over-Improving the Property
Not understanding how much to improve the property is one of the most popular mistakes that can immediately turn a house flip into a nightmare. New house flippers, particularly, frequently go too big in renovations, spending far more than they need to. Overspending can lead to budget shortfalls and a loss of profits when you sell. Unless the property you bought is in a very high-end area, you don’t have 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
Another thing 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 some period, it may be highly prone 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 reached the residence to discover that the kitchen cabinets had been stolen right off the walls. A dishwasher and a refrigerator also vanished. Because the property was in an area with few security measures and a low police presence, there was little Sankar could do to gain back her stolen materials and appliances.
A third situation that can make a house flip haunt you is when making expensive financial mistakes. For illustration, house flipper Daniil Kleyman in Richmond, VA, acquired a project house for what he assumed was a great deal. An experienced investor, he did a preliminary market assessment on the property and anticipated that he would be able to remodel and sell it for five times his cost. Regrettably, Kleyman made a series of failures that resulted in losing money on the flip.
Not only did the first contractor he employed walk off the job with his money and without performing the task he was hired to do, but Kleyman had also utilized the wrong comparable properties when estimating his post-remodel sales price. He was compelled to list the property for far less than he had planned. And then the property was burglarized, stripped to the walls, plumbing broken, and flooding in the basement. After resolving the damage and replacing the stolen appliances and fixtures, Kleyman was finally able to sell the house at a loss to an uninterested buyer.
Avoiding Flipping Nightmares
Stories like these emphasize just a couple of the difficulties that come with flipping houses for resale. These investors would have benefited greatly from accurate market data, proven construction professionals, and the expertise of property management professionals from the outset. In Kleyman’s instance, for example, by first asking an industry expert like Real Property Management Azalea City, he would have earned a detailed market assessment before obtaining the property. He would have identified the property’s market value from the start, perhaps changing some of his decisions eventually.
A professional Semmes property manager would have also presented Kleyman with the names of trusted remodeling and repair vendors in his area and would have checked in with those vendors regularly, greatly lowering the probability that the contractor he hired would take his money and run. In the end, the team would have accurately priced and marketed his new property for him, seeking quality tenants willing to pay a competitive monthly rental rate for as long as Kleyman desired to retain the home. The value of this information and guidance is hard to overstate – it could mean the difference between a prosperous house flip and a flipping nightmare.
With local property management on your investment team, you’ll have the help 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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