RE Value Blog

Flipping and the 4 R's - Renovation, Rehabilitation, Remodeling & Repairs
February 20th, 2015 3:39 PM

The Basics of “Flipping” a Real Property



The basics of flipping a real property can be made to seem quite simple in principle. Such properties are typically purchased below market value, which could be, for example, as a result of a foreclosure or an estate sale. The property could be in need of renovation, rehabilitation, repairs or remodeling. These Four R’s can vary significantly. 

In the case of Renovation, the home is to be significantly torn apart and updated, having older mechanical systems, kitchen, baths, flooring, lighting and more, replaced with new materials and components. In the case of extensive improvements being made, this is often referred to as a “gut renovation”. 

A Rehabilitation typically involves restoring the livability, as well as marketability, of a home, with it being brought back into full working order and functionality, as well as aesthetically. The need for a “rehab” may have resulted from a lack of maintenance and very little recent updating. 

Repairs, of course, is addressing those items which are no longer functional or, replacing items which have outlived their effective age, with these items often being replaced. For example, a stove with only two burners working, a leaking furnace or, an old hot water heater. This could also cover damages done to the home by the prior owner. 

Sometimes a home is well maintained, but not up to date in terms of that which is desirable in today’s market. Kitchen counters may be in good condition, but are older Formica type, typically not what current buyers are looking for, such as granite counters. Remodeling can spruce up a property to provide an appearance of it’s being a “turn key” or “move in ready”. All of these terms can be found to be interrelated as the condition of homes varies greatly, and may involve more than just one of the above. 

Some Flippers specializing in this venture are very quality oriented, knowing that to receive a good net return, they must provide the dwelling with quality craftsmanship and materials, resulting in a higher sales price. With some, it may just be a quick turn over, essentially applying band aids over areas in need of repairs or updating, to give the appearance that the home is ready to go. Can you tell the difference? The average buyer often can not, especially when first seeing the property.

 What does a buyer need to do when they have found something that appears to be what they are looking for? Whether you are buying, or selling, what is the Market Value? Both buyers and sellers need to know. Based on recent similar sales, well researched, with a report prepared that summarizes all factors, including the condition. Selling or buying, find out what a home is really worth. Hire an independent Certified Appraiser.

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Posted by Joseph J Randazzo, SCRREA on February 20th, 2015 3:39 PMPost a Comment

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