House flipping in Portsmouth seems like a steady process: buy a bargain property, do a little remodeling, and then sell it for a much higher price. There is no dispute that house flipping has provided large returns to many investors across the country. But flipping houses also involves a high degree of risk; a flipping project can immediately develop into a nightmare if you aren’t cautious. If you like to try your hand at flipping houses, avoid these common pitfalls, or you might find yourself in a real flipping nightmare!
Over-Improving the Property
One of the frequent mistakes that can easily turn a house flip into a nightmare is failing to recognize how much to improve the property. For example, new house flippers typically go too big in renovations, spending a lot more than needed. Overspending can lead to budget issues and a loss of profits when you sell. Unless the property you bought is in a very high-end area, you aren’t 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 scenario 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, it may be more sensitive 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 they were close to finishing the project when she returned home 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 recover her stolen materials and appliances.
A third situation that can make a house flip haunt you is when making expensive financial mistakes. To give an example, house flipper Daniil Kleyman in Richmond, VA, purchased a project house for what he believed was an excellent deal. An experienced investor, he did a preliminary market assessment on the property and planned to be able to remodel and sell it for five times his cost. Tragically, Kleyman made a series of blunders that resulted in losing money on the flip.
Not only did the first contractor he recruited walk off the job with his money and without completing the project he was hired to do, but Kleyman had also chosen the wrong comparable properties when estimating his post-remodel sales price. He had to list the property for significantly less than he had planned. 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 a buyer who wasn’t enthusiastic.
Avoiding Flipping Nightmares
Stories like these demonstrate some of the hardships 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 start. In Kleyman’s instance, specifically, by first getting the advice of an industry expert like Real Property Management Hampton Roads, he would have gathered a detailed market assessment before acquiring the property. He would have recognized the property’s market value from the beginning, possibly altering his mind afterward.
A professional Portsmouth 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 frequently, dramatically lowering the risk that the contractor he hired would take his money and run. Lastly, the team would have accurately priced and marketed his new property for him, searching for 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 aid is expertise 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 need the support 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.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.