Think you have what it takes to flip houses?by Tim Manni
I know at least some of you are seeing these dreadful housing reports on falling home prices and bloated housing inventories and saying to yourself, “Maybe I can cash in on a great deal. Maybe I’ll buy a home for cheap, fix it up and sell it for a profit.”
While I can’t blame you for recognizing an opportunity to snatch up even one of the great deals this county’s real estate market has to offer, I have to warn you that flipping houses isn’t easy and it isn’t a way to make a quick buck. Sure, prices certainly make the opportunity more enticing, but buying, fixing, managing and reselling a property for profit is not for everyone.
Just a few years ago, countless TV shows glamorized house flipping, making it out to be a get-rich-quick formula anyone could follow. As we all now know, the drastic drop in home prices nationwide has put many flippers out of business. While there still are cable shows about the remaining house flippers, and the business practice is still there, the model has certainly changed.
Before you decide to go into business for yourself, you’ll want to stop and really think about what you are trying to accomplish with this home purchase. Flipping is not the “get rich quick” formula it was just a few years back. In fact, it never really was. These days, you can easily lose your hard-earned money if you’re not careful and do not know exactly what you are getting into.
Here are some mistakes you need to avoid when purchasing a home for a quick resale:
Overlooking costs: If you would prefer not to lose money on a project (presumably, that is the case), you have to identify every cost you are likely to incur. Some, like permit fees and the cost for waste disposal, are easy to overlook, but add up to an amount you need to factor in.
Going outside the box: Looking for cute or unique properties “can kill you on the remodeling costs,” says Evans. Instead, focus on the basic house that is most in demand in your market. It may just be a three-bedroom, two-bath ranch house in a neighborhood with decent schools.
Being impatient: Assuming (and thus budgeting) that the process will go more quickly than it will can really hurt you. Allow yourself at least six months from the day you close to sell the home, McClelland says. That gives you three months to redevelop the property, another few to market and sell it, along with some time for the sale to go through.
Missing the target on the renovation: You need to know which features are the most popular in your market, notes Mendenhall. In some areas of the country, hardwood is the flooring of choice. In others, it is carpeting. The key is to identify and try to incorporate features most likely to attract the most buyers in your neighborhood.
Be sure to read Karen Kroll’s entire article to learn more about what it takes to flip houses.