House flipping in Brooklyn appears to be a straightforward idea: buy a bargain property, do some remodeling, and then sell it for a much higher price. There is no denying that house flipping has delivered substantial returns to many investors across the country. But flipping houses also involves a high degree of risk; a flipping project can rapidly turn into a nightmare if you aren’t ready. If you’d like to try your hand at flipping houses, avoid these usual pitfalls, or you might find yourself in a real flipping nightmare!
Over-Improving the Property
One of the most typical mistakes that may rapidly turn a house flip into a nightmare is failing to recognize how much to improve the property. Current house flippers, specifically, commonly go too big in renovations, spending a lot more than necessary. Overspending can lead to budget problems and loss of profits when you sell. Unless the property you bought is in a very high-end area, there is no need to go too upscale. The finest 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
Another reason 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 a long time, it may be more vulnerable 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 came to the house to discover that the kitchen cabinets had been stolen right off the walls. A dishwasher and a refrigerator were also missing. Because the property was in an area with few security measures and a low police presence, there was little Sankar could do to recover her stolen materials and appliances.
Costly Mistakes
A third situation that can make a house flip haunt you is when making expensive financial blunders. For instance, house flipper Daniil Kleyman in Richmond, VA, bought a project house for what he thought was an excellent deal. An experienced investor, he did a preliminary market assessment on the property and anticipated being able to remodel and sell it for five times his cost. Unluckily, Kleyman made a series of mistakes that led to losing money on the flip.
Not only did the first contractor he employed walk off the job with his money and without doing the job he was hired to do, but Kleyman had also utilized the wrong comparable properties when estimating his post-remodel sales price. He had to list the property for far less than he had anticipated. And then the property was burglarized, stripped to the walls, plumbing broken, and flooded in the basement. After fixing the damage and replacing the stolen appliances and fixtures, Kleyman was eventually able to sell the house at a loss to an uninterested buyer.
Avoiding Flipping Nightmares
Stories like these show just a couple of the issues that come with flipping houses for resale. These investors would have benefited hugely from accurate market data, proven construction professionals, and the expertise of property management professionals from the outset. In Kleyman’s situation, specifically, by first asking an industry expert like Real Property Management New York Gold, 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 his mind afterward.
A professional Brooklyn property manager would have also given Kleyman the names of trusted remodeling and repair vendors in his area and would have checked in with those vendors regularly, considerably minimizing the likelihood 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, locating quality tenants willing to pay a competitive monthly rental rate for as long as Kleyman wished to maintain the home. The value of this information and its support 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 help of experts dedicated to making every one of your properties one of the best long-term investments you can achieve. For more information, contact us online today.
Originally published on July 12, 2019.
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