While the good days are gone house flipping can still reap financial rewards as long as you’re patient and do your research. You need to know that there’s more competition and fewer opportunities. But if you have a keen eye for a real estate investment in Langley, Walnut Grove or elsewhere in the Lower Mainland then flipping a house can pay dividends. Your real estate purchase goals are to time the market, avoid excess costs and plan ahead so problems are met swiftly and efficiently. If changes like new carpets (or cleaning carpets), kitchen cabinets and interior design will cost a few thousand dollars and raise the house’s value by more, flipping that house is probably wise. If mice, termites and some faulty wiring show up out of the blue, flipping the house is almost certainly unwise. For example a house for sale in Langley with an average front yard or a crumbling driveway can substantially increase its value with some quality landscaping. Mr White from Surrey based Urbane Landscapers comments “It is a well-known fact that one of the most prominent contributors to the value of a house is the landscaping and outdoor living areas. That is why it is so critical to have it professionally done. Amateurish attempts stand out like a sore thumb to a buyer. The last thing a home buyer wants to do is tackle re-doing the usable spaces and gardens outside the house.
They want to be able to use it immediately and they are willing to pay a premium to be able to do so – in some cases a substantial one. It is not uncommon for quality, well planned landscaping to increase the overall property value by 15% to 25% and I’ve seen it go much higher than that, on some of the homes we’ve done in the past. A general rule of thumb is that your landscaping budget should be a bare minimum of 15% of the combined value of the lot and the buildings. In other words, if the house and lot are worth a million dollars for example; then the landscaping should be at least $150,000.00.” This is what is often referred to as ‘property value balancing’ or ‘real estate value enhancement.’ As an experienced Walnut Grove Realtor here are my top five tips:
- Buy low and sell high: Taking a distressed home and making it a nice home is easier than turning an already nice home into a gorgeous home.
- The more, the (un)merrier: Every person you hire cuts into the money you make at the end, but don’t cut costs to cut corners.
- Build local, hire local: Buying popular regional materials for traditional styles means there will be more locals who know how to do the work. Hiring a local firm saves money on transport costs and communication costs.
- Understand your profit margin: Flipping a house means selling it as soon as it’s fixed. High prices create a waiting game where time stops being on your side.
- Spend in the right spots: If you skimp and use cheap materials, potential buyers will notice.
Here are four common pitfalls you should avoid:
- Running out of money: As far as investments and risks go, houses are expensive and getting stuck with one you don’t want is a major headache. In the current market, house flippers often make a down payment and borrow money. You need to know your budget, interest rates and financing. Every dollar you spend needs to come back when you sell the property. Even if you pay with your own cash, there are utilities, taxes and property holding costs. If you can’t afford to fix the house, you might be left holding the bag when you try to sell.
- Running out of time: Flipping houses involves months spent searching, negotiating your purchase and repairing your fixer-upper. Contractors and inspectors take time to schedule. If the house you’re flipping is far from your home, you’ll spend time commuting to your investment. Finding a seller can often take longer than you predict.
- Running out of knowledge: It’s not enough to have the money and spend it. You need to understand homebuilding, home repair and the local housing market. Even if you find a bargain, you need to be able to fix it in order to flip it. Your odds of turning a profit depend on keeping the improvement costs down. Investing your own sweat equity costs a lot less than hiring experts for every repair. You need to know which repairs to make and which ones aren’t worth the effort.
- Running out of patience: With a stock, you can dump the investment within a few minutes. If the house you’re trying to flip turns into a money pit, there’s no easy way out. You should always wait until the right house comes along. You want your buyer to become emotionally-invested—but you need a cold and clear understanding of the risks and rewards. You should balance time and money by hiring reliable people who can stick to your schedule. If you can’t invest the time to make the necessary repairs and find a buyer, you’re more likely to lose money.
The real estate opportunities are still around in British Columbia, but you need to invest money, time and patience. You need to know houses, the market and the costs of improvements. There are always opportunities as long as you’re wise and get good advice. Have you ever flipped a property? What’s your number one piece of advice? How long did you hold onto the property? Let us know below in the comments section!