House flipping in Milpitas appears to be an uncomplicated concept: procure a bargain property, undertake a little remodeling, and then sell it for a much higher price. There is no denying that house flipping has given significant returns to many investors across the country. But flipping houses also involves a high degree of risk; a flipping project can immediately become a nightmare if you are not ready. If you choose 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
Failing to understand how much to improve the property is one of the most typical mistakes that can easily turn a house flip into a nightmare. Most of the time, new house flippers often go too big in renovations, spending much more than needed. 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, you don’t have 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
Another circumstance 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 while, it may be more vulnerable to this issue. 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 made it to the property to discover that the kitchen cabinets had been stolen right off the walls. A dishwasher and a refrigerator were also stolen. Because the property was in an area with few security measures and a low police presence, there was little Sankar could do to retrieve her stolen materials and appliances.
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, procured a project house for what he supposed was a wonderful deal. An experienced investor, he did a preliminary market assessment on the property and figured he could remodel and sell it for five times his cost. Unluckily, Kleyman made a series of blunders that ended in losing money on the flip.
Not only did the first contractor he hired walk off the job with his money and without executing the task 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 expected. 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 a buyer who was not interested.
Avoiding Flipping Nightmares
Stories like these illustrate just a couple of the issues that come with flipping houses for resale. These investors would have benefited significantly from accurate market data, proven construction professionals, and the expertise of property management professionals from day one. In Kleyman’s condition, particularly, by first approaching an industry expert like Real Property Management Silicon Valley, he would have received a detailed market assessment before purchasing the property. He would have learned the property’s market value early on, which could have influenced some of his decisions afterward.
A professional Milpitas property manager would have also sent Kleyman the names of trusted remodeling and repair vendors in his area and would have checked in with those vendors periodically, drastically minimizing the odds that the contractor he hired would take his money and run. In conclusion, the team would have accurately priced and marketed his new property for him, obtaining quality tenants willing to pay a competitive monthly rental rate for as long as Kleyman chose to keep the home. The value of this information and assistance is hard to overstate – it could mean the difference between a great house flip and a flipping nightmare.
With local property management on your investment team, you’ll have the guidance 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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