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Why Flips Fail

The housing market has shown to still be moving fast and furious in many areas.  In my market, I have seen more flips hitting the market lately and many are first attempts for new flippers. Many of the houses that I am seeing completed now were purchased early in 2020.  Because I look at so many houses as potential projects even when I pass, I’m interested to see what happens when they are sold.  I like to see what the purchase price was, who is working on the house, did an investor purchase it or is it a homeowner?  Also, after the house has been renovated, I like to check the list price.  These numbers give me a better idea of how to look at my numbers in the future.  

When  a flip doesn’t sell, especially in a strong market it’s usually because of one of these problems:

  • The renovations don’t line up with the price (or the neighborhood)
  • The house is priced too high
  • Fundamental flaw in the house or location

The good news is the first two problems can be fixed. I’m sharing a few ways to help avoid a flip fail below. As for the fundamental flaw, the only time that can be addressed is by not purchasing the property.  Just something to keep in mind when you feel the urge to to overlook something that is a red flag.

Why Do the Renovations Fall Short?

1. Lack of planning

This is a broad statement that could apply to many individual parts of flipping, but for the purposes of this post, we are going to say lack of planning out the project.  House flipping isn’t something to be done “accidentally.”  From the time you have an accepted purchase agreement you have the time to set up every step all the way to demo day.  Scheduling and planning your flip before you close on it is a huge opportunity that you need to take advantage of.  Once we have a purchase agreement, we make arrangements to go to the house and take our measurements so that we can apply for permits and get drawings for the sub-contractors to give us bids.  Every day counts in a flip, even before you actually have the keys in hand.

2. A kitchen that doesn’t work

This week I saw a house come back on the market that I walked through 7 months ago.  I chose to pass on it because the numbers didn’t work but someone else bought it and flipped it. The very first photos were of the kitchen and the space looked good until you looked a little closer.  The dishwasher was directly next to the range and not the sink (which was across the kitchen).  Can you imagine having a wet, dripping dish and having to walk 10 steps to load it into the dishwasher? Its not uncommon to see people have the wrong size cabinets in kitchens, doors on incorrectly and drawers and doors that catch on appliances or create a space you can’t work in because you’re trapped by a door.  Every home improvement store offers kitchen planning with the purchase of cabinets.  Using this can save you time on market and lost offers by getting it right the first time. 

There is something “important” about the property that cannot be changed – I have bought houses before where they were a 7 our of 10 when it came to having everything a buyer would want.  Unfortunately, those other items were what kept a buyer from committing to a n offer. Minimizing or explaining why something big isn’t a big deal is a red flag. The minute you feel yourself moving in that direction, walk away.

Despite what you may hear, many of the bumps in house flipping can be avoided.  Knowing which areas are most likely to trip you up before you start is a crash course in a successful and profitable flip.

3. They don’t do the things that make sense

Many houses have things that are strange.  Things  like homeowner improvements that function but are an eyesore.  They are things that you look at and think, “huh, why is that there?.”  If you buy a house to flip and you have contractors working in the house, its the perfect time to address those things.  If you improve things around them and leave them in place, they will stand out even more. 

4. They skip the staging

Aside from making for great photos to show off the changes from before to after, staging adds to the buyer experience.  When a house is staged, buyers can more easily see themselves living in the space.  Every room, every use is an experience created by proper staging.  People can come in, walk around and sit in the kitchen.  Exactly as they will in the morning when they have their coffee.  They can see themselves hosting a house warming party or holiday in that dining room with the amazing light fixture you added.  

5. They price too high

Before you put an offer in on that flip you will have looked at comparable sales, otherwise known as ARV (after repair value).  That is the time when you set your sales price as a benchmark.  All of your other numbers need to work with that benchmark price, including your profit.  Don’t count on a price increase to compensate. It’s better to sell quickly then to price high and be left with a house that is sitting on the market.

Ready to take that next step when it comes to flipping?

Now that you know how to fund a flip, here are some additional resources to help you get the information you need to move forward on creating your flipping life.

Make sure you have the Fixer Upper Checklist so you know which areas are key to added value in a home.

There are several videos available on finding houses, renovations, and funding on the Threshold Homes YouTube Channel. Check out your favorite flipping topics and new videos weekly.

You can’t close a successful and profitable flip unless you start. Let me know what your biggest challenge is with getting started house flipping. I’m here to help.

Amber

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Want to buy a property and renovate it?

I have a freebie checklist that will help you — 8 Things I look for When Purchasing a Home. Just click here to download it.

Love before and afters?

Follow us on IG @thresholdhomesmn and FB  @thresholdhomesmn to see the projects we’re working on. And for more ideas on renovating & restoring fixer-uppers!

Looking to buy a house to renovate? Check out the fixer upper checklist to help you find the house with the most “flip” potential.

For more inspiration follow me on Pinterest @thresholdhomesmn

Pinterest-Threshold Homes
Real Estate, House Flipping, Home Renovation, Selling a house for profit
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