House flipping in Hanover County seems to be a simple concept: acquire a bargain property, perform some remodeling, and then sell it for a much higher price. There is no question that house flipping has made considerable returns for many investors across the country. But flipping houses also involves a high degree of risk; a flipping project can swiftly turn into a nightmare if you aren’t prepared. 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 most common mistakes that can quickly turn a house flip into a nightmare is not knowing how much to improve the property. New house flippers, in particular, often go too big in renovations, spending far more than they need to. Overspending can lead to budget issues and losing out on profits when you sell. Unless the property you bought is in a very high-end area, there is no need 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 method 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 time, it may be more 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 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 errors. For illustration, house flipper Daniil Kleyman in Richmond, VA, acquired a project house for what he believed was a perfect deal. An experienced investor, he did a preliminary market assessment on the property and hoped to be able to remodel and sell it for five times his cost. Sadly, Kleyman made a series of blunders that cost him losing money on the flip.
Not only did the first contractor he recruited walk off the job with his money and without performing the task 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 flooded in the basement. After restoring the damage and replacing the stolen appliances and fixtures, Kleyman was later able to sell the house at a loss to a less-than-interested buyer.
Avoiding Flipping Nightmares
Stories like these show just some of the issues that come with flipping houses for resale. These investors would have benefited immensely from accurate market data, proven construction professionals, and the expertise of property management professionals from the beginning. In Kleyman’s instance, specifically, by first contacting an industry expert like Real Property Management Richmond Metro, he would have gained a detailed market assessment before acquiring the property. He would have recognized the property’s market value from the outset, perhaps changing some of his decisions eventually.
A professional Hanover County property manager would have also offered Kleyman the names of trusted remodeling and repair vendors in his area and would have checked in with those vendors occasionally, significantly decreasing the possibility 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 eager to pay a competitive monthly rental rate for as long as Kleyman wished to keep the home. The value of this information and guidance is difficult to overstate – it could mean the difference between an effective 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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