House flipping in Kimberly looks to be a simple approach: acquire a bargain property, do some remodeling, and then sell it for a much higher price. There seems to be no doubt that house flipping has yielded substantial returns to many investors across the country. But flipping houses also involves a high degree of risk; a flipping project can rapidly develop into a nightmare if you are unaware. If you’d like to try your hand at flipping houses, avoid these common mistakes, or you might find yourself in a real flipping nightmare!
Over-Improving the Property
One of the most typical mistakes that may instantly turn a house flip into a nightmare is not recognizing how much to improve the property. New house flippers, specifically, often go too big in renovations, spending a lot more than they need. Overspending can lead to budget shortfalls and loss of profits when you sell. Unless the property you bought is in a very high-end area, it is not necessary to go too upscale. The finest 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 possibility 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 duration, it may be more defenseless to this problem. House flipper Carol Sankar of Charlotte, NC, describes one project in which the home was burglarized multiple times during the remodel. One day close to the end of the project, she came to the house to discover that the kitchen cabinets had been stolen right off the walls. A dishwasher and a refrigerator were also missing. Because the property was in an area with few security measures and a low police presence, there was little Sankar could do to retrieve her stolen materials and appliances.
A third situation that can make a house flip haunt you is when making expensive financial decisions. As an illustration, house flipper Daniil Kleyman in Richmond, VA, obtained a project house for what he believed was an excellent deal. An experienced investor, he did a preliminary market assessment on the property and expected to be able to remodel and sell it for five times his cost. Unfortunately, Kleyman made a series of inaccuracies that led to losing money on the flip.
Not only did the first contractor he selected walk off the job with his money and without performing 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 imagined. And then the property was burglarized, stripped to the walls, plumbing broken, and flooding in the basement. After patching up the damage and replacing the stolen appliances and fixtures, Kleyman was eventually able to sell the house at a loss to a less-than-enthusiastic buyer.
Avoiding Flipping Nightmares
Stories like these show some of the issues 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 firstly. In Kleyman’s case, specifically, by first interacting with an industry expert like Real Property Management Magic Valley, he would have gathered a detailed market assessment before buying the property. He would have been aware of the property’s market value initially, perhaps changing some of his decisions later.
A professional Kimberly property manager would have also given Kleyman the names of trusted remodeling and repair vendors in his area and would have checked in with those vendors periodically, significantly reducing the likelihood 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, discovering quality tenants happy to pay a competitive monthly rental rate for as long as Kleyman wished to keep the home. The value of this information and its guidance cannot be overstated – it could mean the difference between a profitable 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 greatest long-term investments you can make. For more information, contact us online today.
Originally published on July 12, 2019.
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