Investing in real estate, doing “fix and flips” like you may see on TV, can be a daunting task. Finding a viable property at the right price, getting the necessary funds to renovate it, doing the actual renovations, dealing with problems and surprises along the way, all add up to a difficult undertaking. The TV shows make it look glamorous, easy and extremely profitable.
House Flipping Isn’t Easy
Unfortunately, for novice and even experienced real estate investors, turning a lump of coal into a diamond takes hard work, know-how, lots of money, persistence and a little bit of luck all thrown in.
House flipping takes more than just a smile and knocking down a cabinet or two, like the TV shows you see. Just finding a house that might be worth flipping takes time. The numbers have to work. If you pay too much to buy the property, you’ll lose money. If you underestimate the cost to clean, repair and renovate the property, you’ll lose money. If you overdo the upgrades, and make the house “too nice,” you’ll lose money.
Then you have to manage lenders, construction loans, contractors, break-ins, permit delays, vandalism, insurance, surprise problems and more.
After a house is complete, you have to sell the house, which likely involves working with multiple agents, home showings, negotiations, inspections, additional repairs, and if you’re lucky, a closing where you finally get your money back out. If you did every thing right, you hit your best-case-scenario numbers. But if any little thing didn’t go according to plan, you probably took a hit on your expected profit. If too many things didn’t go according to plan, you may have even lost money.
Managing house flipping requires a wide range of abilities and knowledge. And it definitely involves managing a variety of people, from homeowners to contractors to lenders to inspectors to real estate agents and more. If you have difficulty with any of these, a deal can go bad quickly.
Running Out of Money
Perhaps the most common problem in the business of flipping houses is running out of money. This can happen for a number of reasons: not having enough to buy a property in the first place, cost overruns during construction, surprise or unanticipated problems during construction, investor partners who back out, construction loan funding delays, and more.
You must manage your money carefully. Cash flow is critical in every business. In house flipping, especially when you have long renovation times, you have to budget extremely carefully, or you will run out of money. Money tends to flow in large, infrequent chunks, rather than daily cashflow like a retail business, for example.
What To Do If You Find Yourself In Over Your Head
If you are in the middle of a house flip and you realize you are having problems you don’t know how to handle, or if you have run out of money, you need to act quickly to save the sinking ship.
Look hard at your numbers. Is there a way to get the project back on track? Can you cut some of your planned renovations, and still create a nice finished product? Can you renegotiate with contractors or suppliers to get a lower price? Can you get additional funds from an investor or lender?
If you just don’t know how to handle the deal, consider selling the house to another investor who can take over and finish the house. Contact other flippers in your area to see if they would buy the house from you.
Watch This Video
If you have tried to buy and flip a house, but have gotten stuck in the process, either due to lack of funds or not enough knowledge or time or anything else, you are not alone! We see it all the time, and we help investors and flippers to get out of difficult situations. This video shows one of those properties. The investors ran into problems. We helped get them out of it.
Contact us if you need a way out of a flip “gone bad.” We can make you a fast, no-obligation cash offer and close very quickly so you can get out from under the strain of a project that is taking over your life and causing stress.
Video Transcript
Brent Bagley:
Hey, guys, this is Brent.
Greg Kurzner:
And this is Greg
Brent:
And we were with Resideum. This is our latest deal, 1532 Avon Avenue that we just closed on yesterday.
Greg:
All right. This house was owned by an investor who got in financial trouble and had to let this thing go. So we were able to kind of come in, take it from them. And we’re going to go in and finish it. We’re going to make it beautiful.
If you have a house that needs work, that you’re in the process of doing renovations and maybe the money’s run out or the motivation has run out, give us a call. Resideum will come in. We’ll make you an all cash offer. Take the house off your hands and we’ll help you get out of it. We’ll turn it into something beautiful. Come on in. Let’s take a look.
All right. When we got this, it looks like this. This is one we closed on yesterday.
As you can see, there’s a whole lot of stuff in here. When it’s finished, it’s going to be fantastic. Why don’t you tell us Brent what we’re going to do in here?
Brent:
So this room right here will be the kitchen and the living room. We’re going to open it up. We’re taking this beam out right here. So that’s not going to be there. And the kitchen’s over here to the left and Greg will walk you through the rest of the house.
Greg:
So we have two bedrooms here and a bathroom. We will spare you the dead rats in the tub. And this is the addition to the house. This is originally where the house finished. And so it’s bumped out all the way through here for a big master suite. So picture this. You’ve got the master suite along the back of the home. What we’re going to have in here are his and hers closets and then a big master bath area with double vanities, big shower and the water closet.
So stay tuned. And hopefully in the next couple of episodes, you’re going to see this thing transformed from sticks to a finished product. It’s Greg from Resideum and…
Brent:
This is Brent over here.
Greg:
And we will see you later.
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