By startingpoint September 2, 2014

By definition a flipper can be defined as someone who buys a home and then fixes it up and sells it within a six month timeframe. Here are some of the biggest mistakes ‘flippers’ make:

  • Not estimating enough for repairs
  • Paying too much for a property because they didn’t account for all of the work needed
  • Didn’t figure in hidden expenses like utilities, holding costs, selling costs, etc.
  • Doing the work themselves to save money
  • Over extending themselves by growing too quick. Meaning one goes out and buys several properties at once and gets in over their head
  • Not knowing the area/ neighborhood
  • Over improving, or under improving

o   Granite counter tops in an area where they are not common

o   Slate or ceramic tile in an area where linoleum is acceptable

There is always a demand for people who rehab houses. Mainly because there will always be distressed properties and a shortage of buyers to buy them. For the average home buyer, financing is nearly impossible to get for a distressed property and therefore limits the demand. The average home buyer doesn’t have the income or cash to put 20% to 30% down not to mention the additional money needed to rehab the property.  So, the worse the condition of the potential property the better for you to get a good deal and have a good investment. Don’t get me wrong we all like an easy carpet and paint rehab, but they don’t always have the highest margins and every investor in the market will be bidding on them. Generally speaking, the uglier the house the less interest it will have from other buyers therefore driving down the price and giving you more leverage to negotiate.

There is always a house to be rehabbed because retail buyers want move in ready homes, and obviously not all homes can be in this condition. Look at local numbers in the areas you are familiar with to figure out the number of distressed homes and the relative real estate market.

As we write this there is a big shortage of homes that are move in ready in almost all price ranges because of the last 7 years of a declining market, distressed sales, short sales, family hardships, and foreclosures have all left lots of homes needing work. And a great opportunity for you as a real estate investor to get in at the right price put the right amount of work into it and FLIP!

“Buy real estate in areas where the path exists…and buy more real estate where there is no path, but you can create your own.” -David Waronker

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