You know the saying: “If it sounds too good to be true, it’s probably a house flip.”
Isn’t that how it goes?
Okay, maybe that’s not the original phrase, but the house flip frenzy is still happening for the same reason diet pills and spray tans are popular – we like things to be fast and easy.
Flipping houses is a gamble; and as in gambling, sometimes you win and sometimes you lose. If the stars align and you find an underpriced house in a great neighborhood that needs a little TLC before hitting the market, you’re probably going to make some money.
But. . .
If you find that same house and then uncover the creeping mold, the cracked foundation and the sketchy electricity, you can say goodbye to your profit and your sanity.
Don’t get me wrong here – I am not against house flips. On a big, big scale it can be good for the seller, the buyer, and the neighborhood. After all, updating an eyesore and finding owners to love and cherish a property is a good thing.
Still, with television shows such as Property Brothers and Flip or Flop, with all of their fancy lighting, hunky contractors and 30-minute timeframe, it’s easy to get swept up in something that appears to be fast and easy when, in real life, it can be slow and really, really (really!) tough.
Planning on buying a ‘fix and flip?’ Here are a few tips to keep you in the money, instead of landing you in a money pit:
Rely on a Realtor and Other Professionals:
Realtors, real estate attorneys and accountants can help you navigate the dollars and sense of an investment. Could buying this house put your financial future in jeopardy? Or your other properties? Or your bank account? Before taking this step, recognize what’s at risk with you and your investments.
When it comes to the nuts and bolts of things, surround yourself with reputable, experienced professionals. Make sure all of your contractors and suppliers are licensed, insured, recommended, honest, trustworthy and competent. Also, work with people you like. You’re going to be working side-by-side on a huge project, and you want to get along with the people who are literally putting your house together.
Don’t Be a Hero:
If you have questions, ask. If you don’t agree with a suggestion from a friend, investment partner, supplier, speak up. If you don’t know how to rewire the water heater, don’t! Just don’t!
Do Your Due Diligence:
There are insurance policies for building repairs that all licensed contractors must hold in order to be in the business. There are specialty policies for buildings that are vacant or under construction. There are home warranties that can protect the appliances already in the home. Looking into insurance is just a way of looking out for yourself.
Look Under the Hood:
Hire the best inspector you can find and don’t balk on the cost. I promise that in the end this expense will actually save you money. An inspector knows what to look for, what is an easy fix and what is a nightmare. Stay away from the nightmare. Nightmares are…scary.
And Back to the Realtor:
No matter how great the house looks, if you don’t have a savvy Realtor on your side, it’s not going to sell. Look for a Realtor who has pulled comps for your neighborhood. Look for someone with experience, a solid marketing plan, a list of recommendations and a network of buyers and sellers.
This blog is a first in a series on the frenzy over fix and flips. Look for part two in the weeks ahead. In meantime, do you have a fantastic or frightening fix and flip story to share? Let’s hear it!