House flipping in Oakland seems like a simple process: purchase a bargain property, execute a bit of remodeling, and then sell it for a much higher price. There is no question that house flipping has brought significant returns to many investors across the country. But flipping houses also involves a high degree of risk; a flipping project can rapidly develop into a nightmare if you are unaware. If you’re planning to try your hand at flipping houses, avoid these common mistakes, or you might find yourself in a real flipping nightmare!
Over-Improving the Property
One of the typical mistakes that can swiftly turn a house flip into a nightmare is failing to determine how much to improve the property. Recent house flippers, specifically, frequently go too big in renovations, spending far more than needed. Overspending can lead to budget complications and a reduction in profits when you sell. Unless the property you bought is in a very high-end area, there is no 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
Another reason 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 significant duration, it may be more 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 walked into the property to discover that the kitchen cabinets had been stolen right off the walls. A dishwasher and a refrigerator were also stolen. 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.
Costly Mistakes
A third situation that can make a house flip haunt you is when making expensive financial mistakes. For illustration, house flipper Daniil Kleyman in Richmond, VA, decided to buy a project house for what he suspected was a perfect deal. An experienced investor, he did a preliminary market assessment on the property and assumed that he would be able to remodel and sell it for five times his cost. Unhappily, Kleyman made a series of mistakes 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 project he was hired to do, but Kleyman had also applied the wrong comparable properties when estimating his post-remodel sales price. He had to list the property for far less than he had expected. And then the property was burglarized, stripped to the walls, plumbing broken, and flooding in the basement. After repairing the damage and replacing the stolen appliances and fixtures, Kleyman was eventually able to sell the house at a loss to a halfhearted buyer.
Avoiding Flipping Nightmares
Stories like these illustrate a couple of the challenges that come with flipping houses for resale. These investors would have benefited greatly from accurate market data, proven construction professionals, and the expertise of property management professionals from the start. In Kleyman’s situation, specifically, by first checking with an industry expert like Real Property Management Pacific, he would have gathered a detailed market assessment before acquiring the property. He would have understood the property’s market value from the start, possibly changing some of his decisions later.
A professional Oakland property manager would have also supplied Kleyman with the names of trusted remodeling and repair vendors in his area and would have checked in with those vendors habitually, significantly reducing the chances that the contractor he hired would take his money and run. Finally, the team would have accurately priced and marketed his new property for him, attracting quality tenants prepared to pay a competitive monthly rental rate for as long as Kleyman wanted to keep 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 aid 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.
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