North Sound Property News

So many books and articles have been written about the various ways to make money off of doing fixer flips that adding another to the pile hardly seems necessary.  However, few articles talk about the potential downsides of this investment strategy.  And with the market currently going through a period of correction, some people see opportunity in picking up undervalued foreclosure or short sale properties, doing a full renovation or just a quick cleanup and repairs, and putting those properties back on the market at a profit.

 My advice?  Do your homework thoroughly before going down this road.  There are ways to make money at this, but there are even more ways to lose money if you are not careful.

 Here are a few basic rules of the road if you want to be successful in this game:

1.  It will cost more than you think to get the house ready to go back on the market.  Make sure you’ve accounted for carrying costs, closing costs on both ends, fees and taxes, and that you have enough margin if things go wrong.  Things go wrong sometimes.

2.  It will take you longer than you think.   And time is your enemy on a fix ‘n’ flip, because every day you delay getting back on the market is a day that you might have to lower the price if the market changes for the worse, and will cost you additional carrying costs.

3.  You must be an excellent project manager.  If you are not, try to find someone who is.

4.  The budget is not a guideline.  You need to have a realistic, well-planned budget in place before beginning the project, and you need to have considered alternate scenarios, with a high, low and mid-cost estimate for all repairs you plan (or may discover you cannot avoid) to do.

5.  Know and stick to the comps for resale value.  If you spend more to rehab or repair, it doesn’t mean you can raise the price.  Plan to be on the market at or just below market value if you can, otherwise your time on market could wipe out any profits you might otherwise make.

  Here’s a link to a great article about some of the pitfalls involved in this strategy.

About the Author: Sandy Kaduce is Associate Broker of Gallery Homes Real Estate. She serves buyers and sellers in North King and South Snohomish counties. She is 2009 Board President of the Mukilteo Chamber of Commerce, as well as Vice President of Site Selection for Habitat for Humanity of Snohomish County. For more information, visit Sandy on the web at www.sandykaduce.com! Read more from this author