House-flipping is the new in-thing in property investment. Prior to the 2008 financial crisis, property flipping bloomed and homes sold relatively quickly. Flipping simply involved buying homes cheap and doing some “fixer-uppers” and then putting them back into the market for a small profit. The overriding strategy is generally that of quick profit and small or even cosmetic updates to make it attractive to buyers.
While this is a very good deal for most sellers, it can be damaging for buyers. There is the risk that you could get a raw deal unless you carry out the requisite due diligence before you buy the property. These make the process of buying flips a risky one as some sellers may not even allow an inspection of the property and might use pressure sales tactics to get you to make a quick decision.
To be on the safe side, it is advisable to carry out a thorough due diligence on the property. Go to the public records and look at the history of the remodel. When did the property last change hands? If it was sold only a few months ago, then you need to give it careful look. It may have undergone a cosmetic remodel to make it attractive for the market and may not be worth the value it is being sold for. The biggest risk with buying a flip is that you may be ripped off for a substandard property.
Not all flips are bad but the worst are generally the properties where the remodeling has been done by DIY-owner flippers. They may not have the expertise and experience in building renovations or remodeling but might insist on a DIY project to save money and increase their margins to your sorrow.
If you are planning to purchase flip, here are some precautions to take in order to get the best deals in the market.
Inspection the Property
Don’t purchase a property without an inspection. Insist on it and if the seller allows it, hire a professional property inspections melbourne service to have a look at the property. Ensure that they are certified and have a reputation for being thorough, independent and professional.
Dig into the history of the home
You need to get some insight about the property before you decide to sink your money into it. Inquire on how long the property has been vacant and
when it was last sold. A property that has stayed for a long period without any occupation may not be so attractive after all. Besides, if it has stayed vacant for long, some of the plumbing and mechanical systems in the house may have degraded over time due to neglect.
Another “historical” aspect of the property that you should look into is the various permits that the house flipper acquired when carrying out their renovations. These will allow you to get some critical insight on whether the property was worked on by a licensed professional and whether the flipper has built a solid reputation in the recent past in their real estate dealings.
Understand the flipping process
If you are planning to purchase a flip, you need to understand the business model of the typical house flipper including the kinds of home that they normally buy, home inspections melbourne and renovations they typically make and their typical markups. Flippers generally make small changes such as replacing appliances and countertops that may amount to anywhere from 10% to 20% of the property purchase price and they will be looking to resell the property as quickly as possible. This helps you understand the psychology of a typical house flipper: they generally don’t want to kill a deal.
The legal hurdles
Watch out on the legal glitches when it comes to the property flipping process. Hire a professional property lawyer to help you through all stages of the transaction to ensure the process is as smooth as possible.