Flipping isn’t easy
MAKING MONEY IN REAL ESTATE
With so many TV networks introducing viewers to the process of flipping houses, more investment seekers are putting their money into fixer-uppers, hoping to quickly remodel and resell them for a fast profit. But Dan Moriarty said simply jumping into such ventures is very risky.
“It’s not as easy as people think,” he said. “It can easily be a full-time job. (The TV shows) all make it look so easy and fit it into that one-hour time span, but you can’t do things halfway. You have to do it right.”
Tools of the Trade
Map it out •
One of the most common projects in a flip, Ballard said, is the kitchen. Computer-savvy remodelers can play around with choices and envision the results with kitchen design software, which is available on its own or from the Web sites of some major retailers, like Lowe’s and Ikea.
Park-like setting •
Many bargain-priced homes may not feature a garage, but don’t become overwhelmed with the thought of building an entire structure from the ground up, especially if it’s a DIY project. Hardware stores often sell garage kits; a solid — but basic — two-car garage can usually be built for as low as a few thousand dollars.
Keep it in the family •
Is demolition on your to-do list? Why not enlist friends and family to help tear out the walls? Very little skill is required for trashing the place. Provide a couple pizzas and get it done within the weekend.
Moriarty is the managing broker of the Coldwell Banker branch at 500 US 31 South in Greenwood. Over the years, he’s completed an estimated 15 flips for himself, stating that a person can’t be in real estate as long as he has without attempting a flip. Though he wasn’t always actively seeking potential projects, his line of work introduced him to a few opportunities that couldn’t be ignored.
“Most of them I came on by accident,” he said. “(A seller) would say ‘I’ll take X just to get rid of it.’”
Moriarty stumbled upon some of his opportunities, but he said that in most cases, the search for the right house should be very extensive. The house price, location and condition will largely determine a flipper’s potential profit, so for someone who is new to such projects or can’t afford to risk much money, finding the “perfect” fixer upper can take a while.
“You’ve got to kiss a lot of frogs before you find a prince,” Moriarty said, adding that he passed on what seemed like 100 houses for every one he purchased.
Though their options would be limited, Moriarty advised that potential investors only look in areas they know. Going outside these areas, he said, is one of the easiest ways to lose money, as resellers are less likely to understand trends and property values in unfamiliar territories.
“If you don’t know values and you don’t know what the market’s doing, you’re going to have a hard time,” he said. “If you misjudge either one of those, you can burn up your profit in a hurry.”
With so many uncontrollable factors, Moriarty stressed the importance of extensive preparation and limiting potential surprises. No house, he said, should be purchased without a complete and detailed remodeling plan in mind. Flippers should significantly overestimate their costs because initial estimates are never sufficient, and houses should be purchased in cash whenever possible. Furthermore, Moriarty said that investors should at least consider hiring knowledgeable real estate agents and contractors.
“Those aren’t expenses,” he said. “They are assurances.”
Moriarty hired contractor Garry Ballard of Woodrow LLC for some of his past projects. Ballard said in addition to providing quality work, his job is to help resellers allocate their budget for the biggest potential profit. Kitchens, paint and flooring need to be addressed in almost every flip, he said, but sometimes his advice on more serious problems determines whether or not a client chooses to invest in a particular house.
Ballard said words like “structural” and “mold” will scare many investors, but these issues don’t necessarily mean a project cannot be profitable. “It’s a matter of how much money it’s actually going to cost,” he said. “I wouldn’t say that there’s anything that’s always a deal breaker.”
Assuming no major renovations are needed, Ballard said most basic flips can be completed in four to six weeks with the right help. The process isn’t easy, but Moriarty said now is the time to buy.
“The market is not bad; it’s just different,” he said. “There are pockets in Indiana that are doing phenomenally well.”
With so many houses on the market, buyers have many good, affordable options, he said. Homes are being sold for less their actual value, and Moriarty said this could mean significant profits.
“I think people who will buy now and use their heads will do very well,” he said.
The market’s status has yet to deter Moriarty, who said he submitted two offers in the last 30 days. Though it’s very easy to do so, he said he has yet to lose money on any of his projects because he was selective and did things the right way. “There’s an awful lot of variables,” he said. “If you’re going to jump into it, don’t be afraid to hire the professionals.”
