Over-Improving the Property
Not calculating how much to improve the property is one of the biggest mistakes that can easily turn a house flip into a nightmare. New house flippers, particularly, regularly go too big in renovations, spending far more than required. Overspending can lead to budget shortages and a loss of profits when you sell. Unless the property you bought is in a very high-end area, you are not required 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 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 an extended time, it may be particularly vulnerable to this risk. 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 missing. 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.
Costly Mistakes
A third situation that can make a house flip haunt you is when making expensive financial decisions. As an example, house flipper Daniil Kleyman in Richmond, VA, purchased a project house for what he thought was a great deal. An experienced investor, he did a preliminary market assessment on the property and projected that he would be able to remodel and sell it for five times his cost. Tragically, Kleyman made a series of missteps that resulted in losing money on the flip.
Not only did the first contractor he hired walk off the job with his money and without accomplishing 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 hoped. 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 eventually able to sell the house at a loss to an unenthusiastic buyer.
Avoiding Flipping Nightmares
Stories like these emphasize just a few of the obstacles 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 case, specifically, by first working with an industry expert like Real Property Management Campanas, he would have received a detailed market assessment before buying the property. He would have determined the property’s market value from the outset, possibly changing some of his decisions afterward.
A professional Selma 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 constantly, greatly lowering the risk that the contractor he hired would take his money and run. Finally, the team would have accurately priced and marketed his new property for him, looking for quality tenants eager to pay a competitive monthly rental rate for as long as Kleyman wanted to retain the home. The value of this information and assistance is difficult to overstate – 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 best long-term investments you can achieve. For more information, contact us online today.