Risk is a part of growing any business. No matter how carefully you plan, sometimes things don’t go the way you expect them to. Flipping houses is not for the faint of heart. It involves a large investment of money to purchase the home and make all of the necessary repairs and renovations. In some cases, investors find that the home may need far more work than initially planned in order to make a sale. The way investors handle the unexpected can mean the difference between a successful fix and flip business and one that doesn’t take off.
The following tips will help you minimize your losses when things don’t go according to plan.
1 – Choose Homes That Will Sell Quickly
The most effective way of minimizing losses when you’re flipping houses is to select homes that are likely to sell quickly. Focus your efforts on areas with good schools and low crime rates. Don’t buy homes that are too expensive, as these will be harder to sell. Even if you run into some unforeseen issues when you’re renovating the home, you can at least be reassured that the house won’t sit on the market once you’re ready to sell it.
2 – Prioritize Your Renovations and Repairs
When you’re flipping houses, it’s in your best interest to keep the renovations and repairs relatively simple. Prospective home buyers tend to look at homes that they can easily picture themselves in. Prioritize repairs and renovations that are essential to the functionality of the home. You need to take care of structural, roofing and plumbing issues first and foremost. If you have the budget after those important repairs are made, focus on installing modern appliances. After those are completed, you can focus on making simple aesthetic improvements to the home.
3 – Remember Who You Are Updating the Home For
We always say we remodel homes for today’s home buyers. Maybe the cabinets are in great condition, but a more modern stain can improve the look of them while keeping costs low versus replacing the cabinets.
4 – Don’t Try to Recoup Additional/Unexpected Repair Costs in the Sale Price.
If you thought the home would sell for $150,000 when you were assessing the purchase of the property, before you found out you had to replace the subfloor or other major repair, don’t try to tack that cost on to the sale price (unless the repair adds obvious value like a new roof). The home will likely still be worth the $150K you figured from the beginning only you’ll have it sit longer on the market, tying up your capital, and have to drop the price anyway.
Get Fix & Flip Funding and Support
Gorilla Capital has experience flipping nearly 3,000 homes over the past 10 years. We’ve seen the good, the bad, and the really ugly and can help you strategize the best way to move forward when things go wrong. Contact us today to learn more about what we can do for your business.