Popular rehabbing TV shows have made house flipping seem like a dream. Flippers purchase decrepit homes for insanely low amounts of money, put a little elbow grease into them and sell them for outrageous profits: what’s not to love? Even when problems occur, they’re fixed and wrapped up perfectly by the end of the half-hour show. But in real life, house flipping isn’t always so nicely scripted. Financing issues, construction delays, permit snafus and selling problems can lead to stressful flips that don’t always produce large profits. Before you jump head first, learn a little bit more about the concerns of house flippers and how you can do your best to avoid them.
1) Unexpected delays. For a house flipper, keeping a house project on schedule is paramount to ensuring the largest profit; every additional month of owning the home is additional money paid out of pocket that cuts into the overall profit. Unfortunately there are a myriad of reasons why a house flip might meet delays: bad weather, irresponsible subcontractors and broken equipment are just a few. To avoid delays, house flippers should try to build in additional time to the schedule while also hiring reliable people and diversifying the number of companies they depend on so the project doesn’t rely solely on the shoulders of one company’s availability.
2) Major unexpected repairs. Oftentimes house flippers, even those who performed a thorough inspection before purchasing the home, run into unforeseen problems. Hidden mold issues, water problems and HVAC troubles can derail both the schedule and the budget. To avoid this, flippers should include additional money in the budget for large repairs and avoid purchasing a home to flip if the budgeted profit margin can’t handle a large and unexpected expense.
3) Slow sale. Even if a house flipper’s project stays on schedule to arrive at completion, a home that sits on the market waiting for a buyer also begins to cut into profits. Oftentimes even in hot markets buyers may be leery of flipped homes because of the corners cut to get the project done cheaply and quickly. To combat this, flippers should be diligent in becoming a seller that buyers and buyers’ agents can trust: highlighting the extra measures that have been gone to in order to ensure the home was updated well and even offering an inclusive home warranty may further calm a buyer’s fears.
4) Financing and government issues. If only house flipping could be done without involving the bank or the government! Unfortunately both are known for delaying house flipping schedules. To make the process as streamlined as possible, flippers should be sure to have their finances in order as much as possible to get the financing needed or should pay cash when at all possible so the bank has minimal involvement. As for permits, talking to others who have flipped in the area to learn more about permitting is helpful; oftentimes advertised time estimates for permits aren’t at all accurate and can be misleading to the novice home flipper.
Flipping a home can certainly be fun and profitable but walking into it blindly can be a huge mistake. Do your research and start small so you’ll never be caught off guard or end up over your head!