How to Prevent your "FLIP" from Becoming a "FLOP"
“Flipping” a house or buying a home, fixing it up and reselling it right away is something almost everyone I talk to has thought about doing at one time or another. You may have even dreamed of making it rich this way. People watch TV shows like Flip This House, Property Ladder and Flipping Out and think to themselves, “Hey, I could do that!” Many people try, but few succeed. So, what determines if a project is a successful flip or an all-out flop?
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The home we were buying was a foreclosure so the bank had “winterized” the home which meant they had all the pipes drained and all the utilities disconnected. This is typical for foreclosures. The problem is that your ability to inspect or have the home inspected is limited because you may not be able to get utility service restored until you own the property. You are taking a risk by assuming the electrical, mechanical and plumbing systems are fully operable. Another hurdle involved the financing of the project.
Since this home had all the carpeting on the second level removed, it was considered by conventional lenders to be uninhabitable. Basically, most lenders will not loan you money on a home they consider to be uninhabitable because if you default on the loan they are stuck with a home that they would have to fix up to sell. Sounds crazy right? Well that’s way it is. Conventional lenders who are required to abide by government regulations make it very difficult to obtain a loan on an investment property. You will most likely need to find an alternate lender.
Once you have the secured the financing and purchased the home, the next critical decision is determining which renovations will net you the most profit. This is where an experienced designer makes all the difference. In order for you to ultimately sell your property quickly and for the amount you are asking, it needs to be renovated right. There are minor changes that can net a major profit and there are major changes that can cost you more than you will get back. Knowing the difference between the two will determine whether or not your project is a successful flip or a colossal flop.
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I see contractors make design mistakes time and again that cost them thousands of dollars because they wanted to save money by cutting out the designer or architect. If you truly want to make money on a flip, you need to invest in an experienced professional designer who understands how to design a luxury home on a low income budget. A good solid design will sell faster and for more money every time.
|Quality Finishes and Appliances Make all the Difference|
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When the project is complete, furnish and stage the home before listing the property. Your designer or realtor will be able to guide you through this process. By following these recommendations, you are far more likely to successfully flip your property rather than being stuck with a flop.
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