House flipping in Ivins seems to be an easy notion: buy a bargain property, conduct a little remodeling, and then sell it for a much higher price. There is no denying that house flipping has brought significant returns to many investors across the country. But flipping houses also involves a high degree of risk; a flipping project can rapidly turn into a nightmare if you aren’t vigilant. If you want 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
One of the usual mistakes that can easily turn a house flip into a nightmare is failing to understand how much to improve the property. In particular, new house flippers frequently go too big in renovations, spending far more than required. Overspending can lead to budget difficulties and a loss of profits when you sell. Unless the property you bought is in a very high-end area, it is not needed to go too upscale. The ideal 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 situation 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 a long period, it may be more prone to this condition. 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 got to the house to discover that the kitchen cabinets had been stolen right off the walls. A dishwasher and a refrigerator disappeared as well. Because the property was in an area with few security measures and a low police presence, there was little Sankar could do to recover her stolen materials and appliances.
A third situation that can make a house flip haunt you is when making expensive financial blunders. To give an example, house flipper Daniil Kleyman in Richmond, VA, purchased a project house for what he assumed was a wonderful deal. An experienced investor, he did a preliminary market assessment on the property and concluded that he could remodel and sell it for five times his cost. Sadly, Kleyman made a series of errors that caused in losing money on the flip.
Not only did the first contractor he employed walk off the job with his money and without finishing the job 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 planned. 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 wasn’t very enthusiastic about it.
Avoiding Flipping Nightmares
Stories like these show just a few of the problems that come with flipping houses for resale. These investors would have greatly benefitted from accurate market data, proven construction professionals, and the expertise of property management professionals from the start. In Kleyman’s scenario, primarily, by first engaging with an industry expert like Real Property Management Southern Utah, he would have acquired a detailed market assessment before buying the property. He could have changed his mind about some of his initial decisions when he learned about the property’s market value from the start.
A professional Ivins 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 likelihood that the contractor he hired would take his money and run. As a final point, the team would have accurately priced and marketed his new property for him, looking for quality tenants prepared 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 hard 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 assistance 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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