House flipping in Lebanon looks like a simple concept: buy a bargain property, perform some remodeling, and then sell it for a much higher price. Without question, house flipping has given numerous returns to many investors across the country. But flipping houses also involves a high degree of risk; a flipping project can quickly escalate into a nightmare if you are unprepared. If you’re planning to try your hand at flipping houses, avoid these typical dangers, or you might find yourself in a real flipping nightmare!
Over-Improving the Property
Not understanding how much to improve the property is one of the frequent mistakes that can eventually turn a house flip into a nightmare. Particularly, new house flippers frequently go too big in renovations, spending far more than necessary. Overspending can lead to budget shortfalls and loss of profits when you sell. Unless the property you bought is in a very high-end area, you don’t 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
One more possibility 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 lengthy period, it will be particularly susceptible to this situation. 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 entered the house to discover that the kitchen cabinets had been stolen right off the walls. A dishwasher and a refrigerator were also taken. Because the property was in an area with few security measures and a low police presence, there was little Sankar could do to retrieve 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 illustration, house flipper Daniil Kleyman in Richmond, VA, procured a project house for what he assumed was a sweet deal. An experienced investor, he did a preliminary market assessment on the property and expected that he could remodel and sell it for five times his cost. Unsuccessfully, Kleyman made a series of errors that led to losing money on the flip.
Not only did the first contractor he hired walk off the job with his money and not finish the work he was hired to do, but Kleyman had also utilized the wrong comparable properties when estimating his post-remodel sales price. He had to list the property for substantially less than he had wanted. And then the property was burglarized, stripped to the walls, plumbing broken, and flooding in the basement. After the damage was repaired 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 reveal some of the difficulties that come with flipping houses for resale. These investors would have reaped enormous benefits if they had accurate market data, proven construction professionals, and the expertise of property management professionals from the outset. In Kleyman’s case, in particular, by first collaborating with an industry expert like Real Property Management Beacon, he would have received a detailed market assessment before acquiring the property. He would have identified the property’s market value from the outset, which could have influenced some of his decisions later.
A professional Lebanon 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, drastically diminishing the likelihood 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, discovering quality tenants willing to pay a competitive monthly rental rate for as long as Kleyman chose to retain the home. The value of this information and support cannot be overstated; it could mean the difference between a successful 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 best long-term investments you can do. For more information, contact us online today.
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