Are you considering purchasing a Wilmington home to flip? With good planning, there’s money to make off renovating and upgrading homes, but if you’re new to the business, there’s a lot to learn. We’re sure any expert home flipper will tell you they’ve had their own growing pains. We’re not experts in flipping homes, but we can provide some guidance from a Realtor’s point-of-view. Here are 5 flipping mistakes not to make:
1. Using the wrong financing. If you aren’t purchasing with cash or a private investor, you must know not all loans are created equal when it comes to flipping a home. Some major lenders have rules about how long a buyer must hold onto a home before selling and how the sale will be handled by all parties. So, make sure you let the lender know what you plan on doing with the home or you may be in breach when you sell.
2. Buying in a community that isn’t selling. You’ve found a home listed at a price that fits your budget, but not much has sold in the community in the past 6 months. Should you invest? In most cases, it probably isn’t worth it, but you need to take into consideration other similar homes and communities. It may just be that not much has been listed in the community. However, if homes are sitting on the market for months, the demand may just be too low to justify the purchase.
3. Buying too high. You know of a community with homes selling often, so you’re pretty sure that you can find an interested buyer for a renovated home. The catch is you need to find a low priced home, which will be difficult if the community is in high demand. Sellers will be pricing accordingly: higher demand, higher pricing. So, you may not find a home that will work for your budget. If you buy a home priced high and make improvements according to current trends, you risk improving out of the selling range. That’s why you need to pay very close attention to the cost of labor and materials when choosing a home to make an offer on.
4. Over-improving the home. You’ve purchased a home that fits your budget perfectly. Now, it’s time to choose the exact materials you’ll be using. You go all out on granite countertops, premium faucets, Brazilian hardwood floors, and Italian tiles, because that’s what buyers are dreaming about (after all, that’s what they’re pinning, right?). The problem is you’ve chosen a grade of materials that don’t exist in other homes in the community and buyers are not willing to pay more for them. So, your property sits on the market while homes with laminate countertops and chrome faucets sell quickly.
5. Not improving according to a community’s demand. You got a good deal on a home that needs some updating. You’ve installed brand new kitchen cabinets that are higher than normal to provide extra storage room and removed the old shower in the master suite to replace it with a new one. The problem is that the cabinets are too high for someone in a wheelchair and there are no grab rails in the shower. If you’d done your research on area demographics prior to renovating, you would know that baby boomers are the primary purchasers in this community. Now, you’re extremely limited on who you can market to.
The home you buy can make or break your chances at making money off of a Wilmington flip. Unless you want it to turn into a flop, you should do as much research as possible before purchasing. If you need help determining if a Wilmington property will be a good investment, give us a call! We’d be happy to go over the numbers with you and help you determine which grade of renovations you should be considering.
