Reality TV real estate shows make it look easy: Investors buy a rundown home, fix it up, and flip it for a handsome profit in a relatively short amount of time. In real life, it’s not that cut and dry. Not every fixer-upper will lead to riches, and determining which homes are worth the investment takes much more careful consideration. If your clients are considering house-flipping as an investment, you can help them ensure the properties they choose are more fab than a flop.
Mitzie Phillips of Century 21 Patriot in Fayetteville, North Carolina, offered four things a buyer should be aware of when deciding which home would be a solid first investment in the article “What Makes a Good ‘Flip’?” on Fayobserver.com.
- Price vs. value: The range between the price of the home and the value of the home needs to be enough to cover repairs, loan costs, and commissions and still provide a profit, Phillips wrote.
- Desirable location: The home doesn’t have to be in the best school district in town, Phillip noted, but it should be in an area with steady sales.
- Fair to good condition: Phillips recommended getting the home inspected by a licensed home inspector because there may be issues that you don’t notice.
- Kitchens and baths: Kitchens and bathrooms are the most important rooms, so “when purchasing a house to flip, be sure that the kitchen is of a design that the majority of buyers would like, and if it’s not, plan on renovating it to make it work,” Phillips wrote.
In the article “House flipping gone awry: 7 warning signs that a flip is a flop” on Bankrate.com, author Jay MacDonald consulted with Reuben Saltzman, a home inspector with Structure Tech near Minneapolis; Tyler Karu, an interior designer/flipper and founder of Landing/design in Portland, Maine; and Justin Pierce, a flipper and president of Snow Goose Homes in Woodbridge, Virginia, who offered their top seven warnings signs of a failed flip.
- Flooring may mask bigger flaws: Saltzman said in the article that poor flooring often is a preview of more serious problems with technical changes involving plumbing and electrical work.
- Kitchen: Pretty – or pretty messed up? Even a nice-looking kitchen can have hidden problems, such as gaps between backsplash and countertops or new doors poorly installed on old cabinets, according to the article.
- Shocking electrical work: “Although it can run over $10,000 to rewire a home, that’s one area where corners should never be cut,” Karu said in the article.
- Jammed doorjambs: Pierce suggested investors bring along a level to the home to see if door jambs and frames square up.
- Mismatched metals: “A lot of times, what you see in a flip is, people were able to get hardware on sale and lighting on sale and plumbing fixtures on sale, and none of it matches,” Karu said in the article.
- HVAC horror stories: Saltzman warned in the article a house-flipping team that turns a home into a construction zone for weeks or months can inflict collateral damage on the heating, ventilating, and air conditioning with drywall sawdust and other airborne debris.
- Safety features that aren’t: According to Karu, house flippers have a moral and financial obligation to make their flip safe.