Flipping Homes

FLIPPING HOMES, MAKE A PROFIT

 

Many investors may feel that this is not a good market to flip homes. It is. Any market is a good market. If the investor is educated and knows the area in which he/she is flipping, it can be lucrative in any type of market.

Sometimes investors want to brag about the fact that they offer the best homes in a particular area or they put more money into flipping homes than any other investor. While this may sound great to some, the truth is many investors are "overflipping" homes. They are over improving and doing much more than what needs to be completed and at a great expense.

In an earlier Blog I stated that appraisers do not take into account that a kitchen has top of the line faucets, custom kitchen cabinets or granite countertops. A new kitchen to an appraiser is a new kitchen. The extras are not making a difference to them. Therefore when flipping a home, although extra improvements may sell the home quicker as the buyer is visual, it will not add more market value. Here are a few ideas to get investors started...

• Do not tear down walls if not necessary. Much of the Charm in our area are the old plaster walls. If you can salvage them do so and avoid the expense of new drywall;
• You do not have to re-wire the entire home unless you feel the wiring is dangerous. Instead upgrade the panel box;
• When renovating the kitchen be careful not to blow your entire budget. Inexpensive cabinets can work just as well as custom cabinets especially if the hardware is appealing. Very nice countertops exist, granite and corian are not necessary;
• Do not change the water service in the house to a PEX system. Most do not even know what it is and although it's a great feature, it adds no value to your home;
• Hardwood flooring can add some value to a home however exotic hardwoods will not. Stay with the normal hardwoods, oaks, etc. and do not waste your budget on more expensive flooring;
• Tiling the kitchen and the bath floors will add value; expensive custom tile will not add any more value, save your budget.
• Adding a full bath or 1/2 bath will also bring you a profit; adding a 3rd bath, when not the norm in the area, or adding a full bath to the 1st floor will not. Many buyers view a 1st floor full bath as a glorified 1/2 bath as most will not use it as a full. You will realize the same profit with a one piece tub surround as you will with a tile surround. Do not customize the tile surround in a bath.

Do not make the mistake of over improving. There is money to be made with this type of investing if you can hold your ego at bay and complete the renovations correctly. Fresh paint, a nice, but not overly ridiculously improved kitchen and bath, hardwood floors and a few accents will make you a nice profit.

I have seen investors put over 100,000 into a home and lose any profit when all that was needed was perhaps $40,000 in improvements. That is a loss of $60,000! Pay attention to the comps in the area. Pay attention to the homes that are selling more quickly. Are they under $200,000? $300,000? It is very important to have all the data at your fingertips to make an educated decision on the type of flip you will be doing.

Remember an experienced Realtor will be able to tell you where the house will sell when all is said and done. Be sure they show you the comps that are available. Do not let a Realtor tell you it will be worth much more than the current comps, it will not. Do your homework. Do not comp a twin to a single or vice versa. Many investors make the mistake of adding for this and taking away for that not realizing that appraisers do not work this way.

 

Jennifer Daywalt, Realtor
RE/MAX Results Realty
Phoenixville's Home Town Realtor
Top Realtor 2004-2011
www.JenniferDaywalt.remax.com

Sellinghomesjenn@aol.com
Author of "Ask The Realtor" in The Phoenix
RE Blogger for The Phoenix
610-489-7355 Main - 610-999-7693 Direct