House flipping in Minneapolis seems like a straightforward concept: obtain a bargain property, execute a little remodeling, and then sell it for a much higher price. There is no question that house flipping has delivered large returns to many investors across the country. But flipping houses also involves a high degree of risk; a flipping project can quickly turn into a nightmare if you are not informed. If you want to try your hand at flipping houses, avoid these common missteps, or you might find yourself in a real flipping nightmare!
Over-Improving the Property
One of the most common mistakes that can immediately turn a house flip into a nightmare is not understanding how much to improve the property. New house flippers, specifically, usually go too big in renovations, spending far more than they have to. Overspending can lead to budget difficulties and losing out on profits when you sell. Unless the property you bought is in a very high-end area, it is unnecessary 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
One more situation 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 some time, it may fall victim to this problem. 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 arrived at the house to discover that the kitchen cabinets had been stolen right off the walls. A dishwasher and a refrigerator also vanished. Because the property was in an area with few security measures and a low police presence, there was little Sankar could do to regain her stolen materials and appliances.
Costly Mistakes
A third situation that can make a house flip haunt you is when making expensive financial errors. By way of illustration, house flipper Daniil Kleyman in Richmond, VA, acquired a project house for what he thought was an excellent deal. An experienced investor, he did a preliminary market assessment on the property and estimated that he could remodel and sell it for five times his cost. Sad to say, Kleyman made a series of errors that resulted in losing money on the flip.
Not only did the first contractor he recruited walk off the job with his money and without completing the project he was hired to do, but Kleyman had also used the wrong comparable properties when estimating his post-remodel sales price. He had to list the property for far less than he had hoped. And then the property was burglarized, stripped to the walls, plumbing broken, and flooding in the basement. After resolving the damage and replacing the stolen appliances and fixtures, Kleyman was eventually able to sell the house at a loss to an unenthusiastic buyer.
Avoiding Flipping Nightmares
Stories like these demonstrate some of the challenges that come with flipping houses for resale. These investors would have significantly benefitted from accurate market data, proven construction professionals, and the expertise of property management professionals from the outset. In Kleyman’s case, in particular, by first seeking out the advice of an industry expert like Real Property Management Viking, he would have obtained a detailed market assessment before buying the property. He would have understood the property’s market value from the start, possibly changing some of his decisions later.
A professional Minneapolis property manager would have also provided Kleyman with the names of trusted remodeling and repair vendors in his area and would have checked in with those vendors habitually, greatly decreasing the odds that the contractor he hired would take his money and run. At last, the team would have accurately priced and marketed his new property for him, hunting quality tenants eager to pay a competitive monthly rental rate for as long as Kleyman wished to keep the home. The value of this information and expertise cannot be overstated; it could mean the difference between a profitable house flip and a flipping nightmare.
With local property management on your investment team, you’ll have the assistance 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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