To Flip or Not to Flip
According to an article written by Trupti Gaokar on Houzeo com, “Shows like Flip or Flop and Masters of Flip have glamorized house flipping across the Cornhusker State. However, the reality of house flipping can be much different than what these shows portray on screen.”
While the goal in flipping houses is to make a wise investment strategy, when purchasing a house, with the intention of selling it for the highest profit, exactly how does one accomplish this successfully? There are many things to take into consideration, and ultimately, it is up to you to determine whether you want to undertake a project that requires only minor touch-ups or one necessitating major repairs.
*PROS*
Earn Significant Profits
Gain Real Estate Experience and Acquire New Skills
Let’s explore the PROS of flipping houses, and learn some tips to ensure the flip is both a positive and profitable experience:
*Buy Properties at a Discount – think distressed properties, probate homes, and foreclosures.
*Stick to the 70% Rule - don’t purchase a house for more than 70% of a home’s after-repair value and
remember to deduct the renovation costs.
*Extra Expenses – consider taxes, insurance, title fees, selling costs, loan costs, permits, etc. when
planning a budget.
* Take Into Consideration the Following Cost Contributing Factors:
-Home Size – a larger house means more doors, windows, flooring, etc., which are high-ticket items.
-Home Type – some homes have HOA guidelines to follow.
-Home Style – choose a style that fits your budget and stick with that style.
-Room Types – split rooms into two categories for budgeting purposes – wet rooms (kitchens,
bathrooms, laundry, etc) and dry rooms (bedrooms, living areas). Wet rooms cost more to renovate
than dry.
-HVAC Repair or Replacement – a typical HVAC unit costs $8000 (including labor)
-Appliance Replacement – there is a fine line between leaving existing appliances and going
overboard with upgrades that eat into profit.
-Labor – typically between $20-$150/hour – sweat equity can maximize your profits.
-Inspect Before Buying – don’t neglect home inspections to alert you to hidden problems and
renovations.
-Choose a Good Location – near grocery stores, hospitals, schools, low crime.
*CONS*
Flip Could Turn Into a Money-Pit
Financial Loss
James McWhinney - Investopedia.com lists these potential mistakes to avoid in order to avert the CONS associated with flipping houses:
*Not planning Thoroughly – create a detailed plan, budget and project timeline
*Not Having Enough Money
*Not Enough Skills
*Not Enough Knowledge
*Not Enough Patience
*Not Inspecting House Before Purchase
Rochel Maday - BobVila.com wrote in September 2022 that the national average cost in flipping a house was $47,903, with a typical range of $17,920 to $78,082. The following is a list of cost-saving measures to increase profitability:
*COST SAVING MEASURES*
*Buy in bulk or buy discontinued items for a discount.
*Consider doing certain projects yourself.
*Buy high-end, lightly used appliances.
*Repair existing windows rather than replacing them.
*Refinish existing hardwood floors.
*Reglaze and refinish your tub and tiles.
*Refinish kitchen cabinets or replace front panels.
*Make an extra bedroom out of the attic.
*Use gravel on the exterior or repair the concrete.
Although you may still be pondering the ‘To Flip or Not to Flip’ question posed at the beginning of this article, hopefully you found some helpful tips to consider in reaching your decision. Reach out to Sandi Downing Real Estate if you need additional information or ideas in exploring this option.