House flipping in Cranston seems like a simple theory: obtain a bargain property, perform a little remodeling, and then sell it for a much higher price. There is no question that house flipping has given large returns to many investors across the country. But flipping houses also involves a high degree of risk; a flipping project can immediately turn into a nightmare if you are not ready. If you have any desire 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 immediately turn a house flip into a nightmare is not knowing how much to improve the property. New house flippers, specifically, frequently go too big in renovations, spending far more than needed. Overspending can lead to budget problems and losing out on profits when you sell. Unless the property you bought is in a very high-end area, there is no reason 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 time, it may be highly vulnerable 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 near the end of the project, she showed up at the house to discover that the kitchen cabinets had been stolen right off the walls. A dishwasher and a refrigerator also disappeared. 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 errors. For instance, house flipper Daniil Kleyman in Richmond, VA, acquired a project house for what he believed was an excellent deal. An experienced investor, he did a preliminary market assessment on the property and anticipated being able to remodel and sell it for five times his cost. Sad to say, Kleyman made a series of errors that brought about losing money on the flip.
Not only did the first contractor he recruited walk off the job with his money and without finishing 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 anticipated. And then the property was burglarized, stripped to the walls, plumbing broken, and flooding in the basement. After fixing the damage and replacing the stolen appliances and fixtures, Kleyman was finally able to sell the house at a loss to a less-than-enthusiastic buyer.
Avoiding Flipping Nightmares
Stories like these demonstrate just a few of the problems that come with flipping houses for resale. These investors would have significantly benefitted from accurate market data, proven construction professionals, and the expertise of property management professionals from the start. In Kleyman’s case, in particular, by first consulting an industry expert like Real Property Management Providence, he would have obtained a detailed market assessment before acquiring the property. He would have known the property’s market value from the beginning, perhaps changing some of his decisions later.
A professional Cranston 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 regularly, greatly decreasing the odds that the contractor he hired would take his money and run. At last, the team would have accurately priced and marketed his new property for him, looking for quality tenants ready to pay a competitive monthly rental rate for as long as Kleyman intended to keep the home. The value of this information and help is hard to overstate – it could mean the difference between a good 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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