House flipping in Toledo seems like a basic idea: buy a bargain property, execute some remodeling, and then sell it for a much higher price. There is no doubt that house flipping has delivered significant returns to many investors across the country. But flipping houses also involves a high degree of risk; a flipping project can quickly grow into a nightmare if you are unready. If you want to try your hand at flipping houses, avoid these common misconceptions, or you might find yourself in a real flipping nightmare!
Over-Improving the Property
One of the most common mistakes that can rapidly turn a house flip into a nightmare is not identifying how much to improve the property. Mostly, recent house flippers often go too big in renovations, spending far more than needed. Overspending can lead to budget difficulties and a reduction in 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 way 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 especially prone 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 appeared at the property to discover that the kitchen cabinets had been stolen right off the walls. A dishwasher and a refrigerator also went missing. Because the property was in an area with few security measures and a low police presence, there was little Sankar could do to return her stolen materials and appliances.
Costly Mistakes
A third situation that can make a house flip haunt you is when making expensive financial decisions. For illustration, house flipper Daniil Kleyman in Richmond, VA, bought a project house for what he perceived was a perfect deal. As an experienced investor, he did a preliminary market assessment of the property and believed that he would be able to remodel and sell it for five times his cost. Unluckily, Kleyman made a series of blunders that ended 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 labor 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 calculated. And then the property was burglarized, stripped to the walls, plumbing broken, and flooding in the basement. After rebuilding 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 emphasize a couple of the difficulties that come with flipping houses for resale. These investors would have earned significantly from accurate market data, proven construction professionals, and the expertise of property management professionals in the early stages. In Kleyman’s instance, specifically, by first engaging with an industry expert like Real Property Management Clarity Team, he would have gathered a detailed market assessment before buying the property. He would have realized the property’s market value initially, perhaps changing some of his decisions later.
A professional Toledo property manager would have also furnished Kleyman with the names of trusted remodeling and repair vendors in his area and would have checked in with those vendors regularly, significantly lowering the risk that the contractor he hired would take his money and run. Ultimately, the team would have accurately priced and marketed his new property for him, recruiting quality tenants eager to pay a competitive monthly rental rate for as long as Kleyman wanted to maintain the home. The value of this information and guidance is hard to overstate – it could mean the difference between an effective house flip and a flipping nightmare.
With local property management on your investment team, you’ll have the help 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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