Despite a recent downturn, house flipping is alive and well. 2014 stats show that 26,947 single family homes were flipped across the nation during the third quarter of 2014, accounting for four percent of all single family homes’ sales nationwide.
So even though instances of this unique element of the real estate world have decreased, flipping is still a viable place to spend your money…and to advise your clients to do the same.
It was inevitable that flippers flooded the real estate market once they realized the jewel among the listings in their midst. And it is due to that fact, that the availability of homes to flip has grown scarcer. In the past year, homes needing greater rehab dollars and more extensive renovations have also made it harder to locate a solid flip candidate. And of course, once people get wind of a great idea, they want to give it a go. The result? A lot of armchair carpenters giving major remodeling projects their best shot, sometimes to the detriment of the result. With people snapping up flips, the prices drops, the market softens and margins shrink.
Before you get too excited, take a look at how to flip a real estate property the legal way.
Then decide if it’s something you want to embark on. Good flippers need a qualified and well-trained team to handle the gamut of flipping issues and any other “surprises” that might crop up when the renovation gets under way. Be prepared to dig into your pocket a little deeper, and the best way to estimate your reno costs is to do your homework on the neighborhood your property is located. Compare the comps similar to yours and gather as much information as possible before you begin: can you walk the home, determine the extent of rehab needed, have your project manager assess right alongside you? If you are able to formulate an idea of costs, and balance those costs against your projected profit, you can make a more informed decision if this is the house for you to flip.
But sometimes…you have to go with your gut. Sometimes you are not allowed to set foot inside the property, and you have to roll the dice. In this scenario, get as close as you can to the property—without breaking in! Drive the area and determine if there are any trouble spots nearby that might affect the value. Check out the neighbors to assess how they take care of their yards and homes. This is a great predictor of the stability of area values.
When you have armed yourself with as much information as possible, leaping into that first flip is much more likely to result in a house that won’t flop.