Flipping homes seems like it is easy enough, just do some renovations to make it look new and sell it for more than you purchased, right? It’s true depending on the property it can often be fairly easy to flip. Being an appraiser I have seen many of these properties sell and many of the common mistakes that are consistently made. I am not an expert in flipping homes, however I do have a bit of experience in the sale of these homes. I have listed the mistakes I see most often that can be avoided and improve your chances of success.
Flipping Home tips:
1) Understand your buyer: Pay attention to neighbors and other properties in the neighborhood. Who is likely to be your buyer, what age are they, what is a good style for your prospective buyer? These are all important things to consider. Understanding who you are selling to can help you determine what style your client is most likely to like and what their life style is going to be most like.
2) Consider the neighborhood: The purpose of flipping a home, usually, is to make money, so it only makes sense to consider what renovations other homes in your neighborhood may have. You want to be sure not to put more money into a home than you can make back in the sale. You do not want the to design the most expensive house on the block, you still will have to sell for market value.
3) Cost of upgrades vs. Cost of sales price- A common misconception that I see a lot is that people believe that what they spend on upgrades is how much they will increase the property in value. If you spend $25,00o in upgrades it does not mean the property value has increased $25,000. The cost of an upgrade such as a pool to a property may be the same in different neighborhoods, however the value that a pool adds to the property will most likely differ depending on the neighborhood.
4) Overbuilding for your Neighborhood- I see overbuilt homes to often in this industry. The two ways that a property can be overbuilt for a neighborhood is by adding too much square footage or spending to much on materials and fixtures.
You want the property to be typical for your neighborhood by adding more square footage than other properties in your neighborhood you are investing more money than you will likely get back because you are overbuilding for your area.
Upgrades are where I tend to see the most money lost on flipping homes. You can spend a lot of money upgrading a property but if you are using materials that are much more expensive than other properties in your neighborhood you will mostly likely not get your money back on the sale. Most buyers will not realize the extra cost you added in materials and fixtures to the home. I cannot emphasize enough; build to what is the norm for the neighborhood.
5) The Appraisal– If you are looking to do a renovation or flip a home, consider having an appraiser come out for a “Subject to” appraisal. You can give the appraiser your plans and materials you will be using on the flip and he will provide an appraisal as if the property had those items completed.
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Brandlin Appraisals Inc. specialize in helping people who need appraisals for estate purposes, divorce, date of death, bankruptcy, FSBO’s and more throughout San Diego county. For more information please contact us at (760)741-7699, or visit our website at Brandlinappraisals.com, or email us at firstname.lastname@example.org
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