When it comes to investment strategies, it’s easy to see why the idea of home flipping might appeal. Buying a distressed property (aka a fixer-upper) at a low rate, fixing it up, and selling it for more than you spent seems like a smart plan for anyone with a discerning eye who loves a project.
Unfortunately, the downsides of flipping can be massive—especially for first-timers. We asked the experts to share their own encounters with major home flipping mistakes, as well as how to spot a problem with a potential home or project before the consequences get out of hand.
Meet the Expert
Ignoring a Bad Layout
Residential real estate expert Steve Laret tells us, "The biggest mistake a flipper can make is thinking that over-finishing a space will cause buyers to see past a bad layout.”
At first glance, a bad layout might seem like it can be resolved with savvy cosmetic upgrades rather than anything structural—but Laret warns that this is a major mistake. “Short-sighted flippers hate to move walls and get into structural work due to the costly nature of it, but if you don't get the layout right, every dollar you spend will just be lipstick on a pig!” he says. “Smart agents and well-monied, savvy buyers won't be interested in your product. You can't spend your way out of an awkward layout."
So, what constitutes a good layout?
“An ideal layout is any layout that doesn't require an explanation,” explains Laret. “Buyers should be able to walk through a home and clearly understand the purpose of every room. If the buyer stands in a space and wonders how they would utilize a room, consider every minute they ponder another thousand dollars off your asking price.”
Not Listening to Your Gut
Buying a home—even to flip it—is an emotional journey. This is one of the reasons it can feel so overwhelming.
“When buyers choose a home, it’s a lot like choosing a mate. It is an emotional connection,” says Laret. “An awkward [space] will create an awkward feeling—and no one gets a second date if the overarching feeling they are left with after the first date is awkward.”
Laret warns that the best way to assess your potential buyers’ emotional connection is to consider how you feel as you stand in a space. “If you, as the developer, wonder how you will stage a room, so will the buyer—and that is bad for business,” Laret says.
Overlooking Current Styles and Trends
“Trends come and go, and while open floor plans are still in, high ceilings are on their way out,” says Laret. “The two-story great rooms and foyers are becoming a thing of the past, giving way to more practical layouts that are more compact and energy-efficient.”
While everything comes back around again, buying a home with too many dated features will make it difficult to flip—and might leave you with a property on your hands much longer than anticipated.
Forgetting About the Stuff You Can’t See
“Be sure to take care of what is unseen—electrical wiring, plumbing pipes, heating and cooling ducts, as well as insulation,” says Jean Brownhill, the founder of Sweeten. “These basic mechanicals represent to a potential buyer the value of a house that is running efficiently and safely.”
Along with being a potential safety risk, the issue is likely something that will be revealed eventually, anyway. “When a potential buyer sends in their inspector, a home that requires repairs or new mechanicals may either move the buyer to demand discounts on the purchase price or walk away,” warns Brownhill.
“One of the crazier things I saw in a flip was [when] a bunch of leftover supplies and garbage were just packed into an air intake vent,” says Cliff Weeks, realtor for Century 21 New Millennium. “Everything looked good from the outside, but once you stood next to it, you could see everything from paint cans and plastic wrap to empty Gatorade bottles almost blocking the whole thing.”
Ignoring a Property’s History
During the buying process, Weeks warns that’s it’s imperative to take the history of the property and inspection seriously. “Research the title to determine whether there are obvious red flags in the history,” says Weeks. “There may be an older survey or plat [map] which will allow the purchaser to somewhat determine whether there may be issues with how the home is sited or become aware of any potential encroachments.”
“[And] inspect everything,” adds Weeks. “It may cost $500 to $1,000 to do so but they will eliminate the potential for catastrophic loss.”
Rushing the Process
“The most common mistakes I see are when a flip appears to be rushed,” says Weeks. “[This has led to] design errors like kitchen appliances not being able to be opened because they hit cabinets [and] poor-looking installation of important cosmetic features like flooring or backsplashes.”
But as Weeks explains, the problems can start even before the design plan is in effect—and most of this boils down to “too much enthusiasm and not enough scrutiny when acquiring the property.” Unfortunately, in a competitive market, that can lead to some major (and majorly expensive) oversights.
“Occasionally, ‘As Is – Where Is’ are the only terms available. Flippers go into it thinking they will modify floorplans, update the kitchen and baths, and generally put a fresh face on the property. They find out a few weeks in that an addition was built four feet over the side yard setback, the septic system has failed, or there is a major structural flaw costing tens of thousands of dollars to remediate,” Weeks says.
Neglecting the Exterior
“Curb appeal speaks volumes and is key to bringing potential buyers through the door,” Brownhill says. “A new front door and garage door offer high ROI. Replacing any roof damage or missing roof shingles is also a maintenance cost a potential buyer may want to avoid. It does not represent a well-kept and maintained house.”
Making Elaborate and Overly Stylized Design Choices
Brownhill also warns that when it comes to decorating the interior space, it’s best to remain neutral. This is particularly true in the key spaces like kitchens and bathrooms.
“A simple refresh of an outdated bathroom [or kitchen] in new, neutral materials allows a buyer to be able to envision their own style and tastes in the space,” she says.
Not Hiring Professionals
If you’re a first-time flipper, it’s imperative you work with professionals from the beginning. “When looking at potential flips, I always want my clients to have the most information possible about comps and trends in the neighborhood,” says Weeks. “Most of the time, they are experienced contractors who know more about construction than I do, [but] they are looking to me to make sure there is enough room in their budget for the profit they are looking for.”
If you’re not an experienced contractor or you’re new to the process, “consider hiring a general contractor to assist with the first few projects,” adds Weeks. “The lowest bidder is not always the best selection when hiring trades. Hire professionals with proven track records.”
Whether you’re planning on buying a flip or buying a property to flip, Weeks has some final words of wisdom: “There are first-time flippers and there are experienced flippers,” he says. “Know which you are, or which you’re buying from. Do not give in to cutting corners because it will cost more to fix it the second time.”