Can You Flip? Or Will It Flop?

It’s amazing how much financial security that real estate can bring, and the popularity of HGTV show a very rosy and glamorous side of real estate investment. This gives many people dreams of buying homes under value, putting in some sweat equity and selling it a few months later for a nice profit. It’s like the American Dream… or is it?

With the tight market in Charlotte and such a high demand with new people moving here each year, finding a low-priced house in a good neighborhood that needs a little TLC is rare these days. A lot of the flips that garner big returns in a few months have already been flipped and re-marketed, so it’s important to branch out from the 3 bedroom/2 bathroom in a well-known neighborhood where grandma lived for 40 years and didn’t update.

Location

Once upon a time the neighborhoods like Plaza Midwood and NODA were the up-and-coming areas, but now they have clearly “arrived” and the prices of homes reflect this. So it’s time to branch out and look for the next great area. Yes, it is a bit of a gamble, but so was buying in South End circa 1990 which was once an industrial park fraught with environmental issues (curious? Brush up on your South End history here.)

Bottom line: What’s old is now new and what was once an EPA nightmare is now highly-sought after real estate. The next great neighborhood won’t look like much today, but buying in a lesser-known area where you see potential for gentrification could pay off big in the future.

Investment Timeline

While flips are often viewed as short-term projects and investments, there’s something to be said for a buy-and-hold property. Going along with the possibility of area gentrification, having a longer view on the investment and generating rental revenue both before and after the renovation could allow significant growth in the home’s value and a steady stream of income during that time period. Make sure you’re prepared to be a landlord or you find a great property management company to handle all of the ins and outs of tenant relations, maintenance and repairs, collection of rents and navigating the scary world of evictions.

Price Point

Flips don’t only occur in the 100k-250k range, though that’s where most people think of them. There are opportunities at all price ranges, even million dollar homes if you’ve got that kind of investment capital to spare. At higher price points the profit margins may be smaller, but they’re still there for savvy investors that are happy to stick to a budget and always plan for an unknown expense.

To find a home that is a good contender for a flip like this, look for a home priced under the median price for the neighborhood, like a 300,000 home for sale in a neighborhood that usually hovers around 500,000 for a home. The difference can often be one was updated to reflect current tastes and the other is in the same aesthetic it was when it was built, whether it was built in the 1980s or the early 2000s.

Oftentimes when a buyer purchases a home in a new construction community they are doing so because they don’t want to make updates or take on improvement projects. So, when they go to re-sell the home 10 years later there can be a dip in price because it looks and FEELS like a 10 year old home. Older paint, brass bath fixtures, and Formica countertops are all tell-tale signs of a below-market price home.

I believe that there are always opportunities in the real estate market, however, those opportunities may look a bit different from what you see on HGTV. Different markets, different factors, different strategies needed.

Happy flipping!

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