Opinion: Don't buy that house flip.
Updated: Jan 5, 2019
Are you in the market for a new (to you) home? If so, you have likely come across the term "house flip." As a contractor in the renovation industry, I want to let you in on the risks associated with purchasing a "flip."
First, we need to understand what flipping a home is and the motivation behind it.
Put plainly; flipping is the practice of buying low and selling high. Often, investors will buy at a discount due to damage or outdated decor, whitewash the property, and list it back on the market.
"Put plainly; flipping is the practice of buying low and selling high."
This process leaves little transparency for the home buyer. The potential for the work to be completed for as cheap as possible is high, considering this is in the investors interest. On the contrary, when a homeowner hires a renovation contractor, it is in their best interest to obtain good value.
Other than the potential whitewashing of problems, separate issues arise.
When buying a home flip, not only do you miss an opportunity to increase the equity of your new home, but to do so with your own taste.
Large scale flipping drives up the costs of neighbourhoods, potentially creating housing bubbles and an affordability crisis.
What to do? The underlying problem with this situation is the inclusion of a middleman trying to make a quick buck. There are two simple ways you can avoid this.
Look for well-maintained homes; these generally do not include rentals.
Buy a home with damage or outdated decor at a discount and renovate before moving in.
When you opt for the second option, don't forget to consult with both your realtor and contractor about the risks specific to the property. Purchasing and renovating a "fixer-upper" comes with additional advantages. Namely, you don't need to pay for someone else renovation tastes, only to replace them with your own. Although this route may cost as much as purchasing a house flip does, you have a home customized to your taste, and no covered up problems.
"...you don't need to pay for someone else renovation tastes..."
A big reason people buy house flips is that they are move-in ready, and purchasing a fixer-upper can be intimidating. It doesn't need to be this way. Having a good contractor on your side, along with a knowledgeable realtor will make the process much smoother. Not only will you cut out the middleman, but you will also have made a worthwhile investment.
Buying a home to fix up isn't for everyone, but if it works for you, it will save you from the potential headaches associated with house flips.