Fix and flip is a proven way to turn sweat equity into excellent profits. When you pick a suitable home to rehabilitate, you stand an excellent chance of making a high return in a short time. Your best investments will be in small, look-alike houses, because they are easier to sell and generate bigger profits. The faster you can sell your rehab home, the more flips you can complete in a year and the higher your income.
Like any other endeavor, it pays to put the odds in your favor. To that end, we review five types of homes that you should avoid for fix and flip projects, because each will be harder to sell and will provide less profit:
- “Different” homes: When you see a home described as different or unique, you should smell a rat. It might be a “classic A-frame” at the forest edge that is selling for a phenomenal price. The price is low because nobody wants to live there! You can rehab the house into a little jewel and still get no prospects, much less buyers. What you want is boring, not unique. People feel comfortable in cookie-cutter homes, and they sell faster. Find a run-down one in a good neighborhood with many similar homes, and you’ll have better luck selling it quickly.
- Too large: Every once in a while, you drive through a neighborhood of smaller homes and see the oddball big home sticking out like a sore thumb. The home will have the smallest price per square foot because and will take more time and money to rehab. Better to rehab a smaller home. You can get it done quickly for less money, sell it faster and move on to your next project.
- Pre-1978 home: Homes built before 1978 suffer from a couple of defects. First, there are issues with lead paint that can cost you a fortune to fix. Secondly, these older homes frequently suffer from small bedrooms, tiny closets and cramped bathrooms. You are less likely to find older homes with the open floor plans favored by modern buyers. Of course, there are pre-1978 homes that don’t suffer from all these problems, but why bother? You should find plenty of homes built after 1978 that aren’t saddled with the kind of risks we’re talking about. If you can’t find newer homes, consider rehabbing in a different area.
- Busy road: If you rehab a home on a busy road, you’re going to turn off parents with young children. That’s a substantial portion of the market, so why alienate them. Some folks will object to the noise and congestion right outside their front doors and will prefer being a few blocks removed from major roads. Don’t be tempted by discounted prices on these homes – they will be harder to sell and will make less profit.
- Bad block: Some rehabbers want to flip a home on the worst block in an otherwise nice neighborhood. The block might have dilapidated houses that are not expected to improve anytime soon. It’s also possible that the block has experienced high crime, with perhaps drug gangbangers squatting in a foreclosed property. You can check with real estate agents for police reports to get a feel for the neighborhood.