House flipping in Trophy Club appears to be a simple process: buy a bargain property, perform some remodeling, and then sell it for a much higher price. There is no denying that house flipping has given a lot of returns to many investors across the country. But flipping houses also involves a high degree of risk; a flipping project can immediately transform into a nightmare if you aren’t aware. If you plan to try your hand at flipping houses, avoid these typical errors, or you might find yourself in a real flipping nightmare!
Over-Improving the Property
One of the most frequent mistakes that can easily turn a house flip into a nightmare is not calculating how much to improve the property. For instance, new house flippers typically go too big in renovations, spending a lot more than what is essential. 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 case 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, this problem may be more frequent. 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 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 get back her stolen materials and appliances.
A third situation that can make a house flip haunt you is when making expensive financial errors. For example, house flipper Daniil Kleyman in Richmond, VA, procured a project house for what he expected was a good deal. An experienced investor, he did a preliminary market assessment on the property and estimated that he could remodel and sell it for five times his cost. Sadly, Kleyman made a series of blunders that resulted in losing money on the flip.
Not only did the first contractor he contracted 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. Therefore, he had to list the property for far less than he had expected. 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 less-than-interested buyer.
Avoiding Flipping Nightmares
Stories like these illustrate some of the hardships that come with flipping houses for resale. These investors would have done considerably better from the beginning if they had accurate market data, proven construction professionals, and the expertise of property management professionals. In Kleyman’s situation, specifically, by first consulting an industry expert like Real Property Management Meridian, he would have acquired a detailed market assessment before purchasing the property. He would have recognized the property’s market value from the outset, which might have made him reconsider some of his decisions.
A professional Trophy Club property manager would have also delivered Kleyman the names of trusted remodeling and repair vendors in his area and would have checked in with those vendors once in a while, greatly reducing 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, seeking quality tenants willing to pay a competitive monthly rental rate for as long as Kleyman wanted to retain the home. The value of this information and expertise is difficult to overstate – it could mean the difference between a great house flip and a flipping nightmare.
With local property management on your investment team, you’ll have the support of experts dedicated to making every one of your properties one of the finest long-term investments you can take. For more information, contact us online today.
Originally published on July 12, 2019.
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