To Flip or Not ? That

Is The Question

By BethAnne Brink-Cox House and Home Feature Writer

Do you remember watching these shows? Room by Room. Fixer Upper. Love it or List It. And, of course, Flip This House, which premiered on HGTV in 2005. These programs undoubtedly influenced the buy it–fix it up–sell for a profit craze about 20 years ago.

Niki Groves, the executive officer at the Builders Association of Elkhart County for the past four years, agrees. But is it still a thing, so to speak? Still a good idea? Groves said, “When everything was selling hot and heavy, it’s been happening for a long time, and it has peaks and valleys. I mean, you can still do it, but you have to have some cash flow to begin, so you can ride it out when the economy slows down. The house might not sell quickly, but then again, it might.” This was certainly a factor during the pandemic and quarantine, and the supply shortage of materials and labor added into that, as well.

What questions would a buyer ask a seller when considering a flipped house? Groves said, “That is a question, well, really, you’d ask the same questions that you would if you were buying any other house. It’s pretty much do you want this house at this price, and the flip factor doesn’t figure into that.”

When buying a house you hope to flip, apart from obvious issues, what are fixer upper points the average person might not think of? There are varying levels of fixer-upper, and there are many levels of skills required, too.

Groves said, “It’s really about the cost. Can they purchase at an affordable cost, put in some labor–90% of that is done by the original buyer–and then resell the house for a profit? If they can, then the first thing needed is an inspection. You definitely want an inspection! A house might have no foundation, might have mold you can’t see; there are signs that an inspector would notice, especially if the basement is finished, smells they can smell, that kind of thing. To really be successful at flipping, to make a profit, you want to buy a house that mostly needs cosmetizing. You don’t really want to tear out walls, replace windows, but rather do something like fresh paint–and wallpaper is making a comeback – maybe something with the floors being refinished or the kitchen cabinetry being replaced.”

If you were thinking this might be a good way to improve some shabby neighborhoods, Groves said it’s not. “The finished houses would be too hard to sell. The clientele who would be seeking to buy a house wouldn’t go to that kind of neighborhood. It’s more likely a city would do that, or a habitat kind of thing.”

What percentage of profit should you aim for, one that is realistic to achieve? “I would think that you would want a 25% return, and that’s only a quarter, if not more. Aim for more, but to be realistic, get at least 25%,” Groves explained. How long do these houses stay on the market? “If you had asked me this question two years ago….but the real estate market has slowed down. It’s not a bad thing, though. My realtors say it’s right where it should be. So let’s say 90-120 days, obviously, the sooner it can be done and back on the market, the better.”

Conclusion: if you’ve got some cash to invest this way, you can still make a profit. Just make sure you don’t put more into the fixing up than you can successfully recoup. n