If you’ve watched many episodes of our show on HGTV, you know that my wife Christina and I specialize in rehabbing houses so that they can sell really quickly. People who aren’t really familiar with flipping houses and the real estate industry usually think that just means that we have to get the work done as fast as possible, put the house on the market and hope for the best. While that’s partially true, it really doesn’t cover the finer points of house-flipping and what goes into a good rehab.

One thing that got me thinking about this was a house-flip we did with a pretty new flipper. This guy had some experience with fix-and-hold properties that he’d rehabbed to rent, but he didn’t really have any experience with flipping. So, when we got inside the property, he and I had some really different opinions. Then, as we got further into the project, things got a lot more stressful before they got better.

Basically, along every step of the process, our partner was looking at our flip like it was being renovated to be rented out to tenants, while Christina and I were looking at what needed to be done to make it attractive to buyers. There are some interesting differences between the two that you might not think of if you haven’t been in this business for a while.

Flipping — You Have to Spend Money to Make Money

First of all, when you see a house that we’ve rehabbed to flip, you’re looking at real investment. Christina and I both know that homebuyers are looking for quality houses with updated, high-quality appliances and fixtures. If they aren’t impressed, they’re going to walk away, and that means that you absolutely have to be willing to spend money on your house flips if you want them to sell.

Renting — You Have to Plan for Wear and Tear

With fix-and-hold properties, though, you have to think of a whole different scenario. You won’t be selling the property, so you don’t have to worry about really knocking potential buyers off their feet. On the other hand, you do need to make sure that the place is livable and clean, and that it has sturdy appliances and fixtures that can put up with a lot of wear and tear.

Basically, even if you and your property manager are as picky as possible about tenants, you can expect the house to undergo some abuse. Tenants don’t have the same vested interest in keeping up with household maintenance that homeowners have, and you’re going to have to pay for just about all of the repair and maintenance calls on the house. That means you aren’t going to worry as much about redesigning the master bath as you are about putting in durable fixtures and flooring that can take a beating.

When you look at your flip from an end-user perspective, you can see why you need to decide from the very beginning whether you’re going to flip or rent your house when you’re done with the rehab.

You can make a lot of money with either flipping or holding a house, but you do have to choose which you’re going to do before you start. A house rehabbed for rental isn’t going to be very attractive to buyers, and a house rehabbed for retail could end up costing you a lot in repairs and maintenance.

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  • Tarek El Moussa

    Tarek El Moussa is the co-star of HGTV’s popular real estate reality TV show “Flip or Flop” along with his wife, Christina El Moussa. The couple started Success Path Education to teach how to successfully invest in real estate. Visit www.SuccessPathEducation.com for more details.

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