I decided to purchase a new construction townhome with the intention to flip it for a profit. Most of the people I know who flip homes choose a foreclosure, short sale or distressed property to flip. However, I have few if any handyman skills. My idea was to take advantage of the extraordinarily low prices on new housing inventory.
According to a recent article by U. S. News & World Report, the average flipper made $30,000 per flip. Even though my flip did not take as much effort as a complete renovation, I was able to make about $32,000 in two years or $16,000 a year on a townhome that originally cost about $103,000.
Doing my homework
One lesson I learned from my flip is that it's important to do a lot of research and study the real estate in a particular area before making a purchase. I purchased the townhome after moving to Florida from Indiana. The real estate prices in Florida seemed extremely low compared to Indiana. If I had broadened my search to other communities and nearby counties, I could have found a Florida house that would have cost less in terms of fees, property taxes and insurance while I lived in it for two years.
Designing for the buyer
I chose paint colors that probably did not appeal to all of the prospective buyers who toured my townhome. I regret not designing more with the buyer in mind. I also should have stuck to a tighter decorating budget. I got carried away purchasing an expensive chandelier, drapes and furniture to stage my townhome. I purchased the upgraded maple kitchen cabinets. However, when my townhome went up for sale a few years later, I saw pictures that showed the owners had painted over my lovely maple cabinets. I could have saved $2,500 by sticking with the basics.
Remaining emotionally unattached
Another mistake I made was becoming too emotionally attached to the townhome. I knew I wanted to flip it for a profit after two years. I chose two years because I didn't want to have to pay the expensive taxes people pay when they keep a property for less than 2 years. I know a lot of successful flippers get in and get out. They don't intend to live in the home they flip. I looked at it as a less risky proposition to buy a home I'd be perfectly happy to live in if no one wanted to purchase it. However, I ended up liking my townhome so much that it was difficult to sell it.
Borrowing items for staging
I regret not borrowing more items for staging the townhome. Even though my townhome sold the first day it went up for sale, I spent a lot of money on new furniture, rugs and plants that I could have borrowed from family and friends. In fact, it turned out I only would have needed to borrow the items for just one day. I could have increased my profit if I didn't go on a spending spree. However, at least I had new furniture to take with me to my next home.
Taking my time with the flip
Although a lot of people rush to put their property on the market right away, I think I was able to make a decent profit by waiting the full two years. I took my time to decorate the townhome as well as have professionals install maple hardwood floors. I've noticed the real estate market is starting to heat up in my Florida neighborhood right now as it did when I sold my first "flip." Still, I'm patient enough to wait for a seller's market.
I think my first house flip might be the last one for some time because I can't afford to purchase an investment property that isn't my full-time residence. I have had more fun helping a few of my friends and relatives locate good real estate deals, but most people I know are more interested in buying properties to rent out. Now that I look back on my first and only flip, I realize I did the right thing by selling my townhome instead of keeping it as a rental property. If I don't have the right mindset to be a house flipper, I don't think I'd make a good landlord either.
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