Is Purchasing a Flipped Property in Your Best Interest?

Here’s why you shouldn’t shy away from flipped properties on principle.

Many homebuyers in today’s market don’t know how to feel about flips. A flip is when an investor purchases a distressed property, heavily renovates it, then puts the good-as-new final product back on the market to sell for a profit. These distressed properties are usually those that you as a regular homebuyer would not be able to buy, as they wouldn’t qualify for any of the financing options that most buyers work with.

Investors buy them with cash, a hard money loan (reserved for highly experienced investors only), or a rehab loan. Rehab loans are an interesting topic in their own right, but the point still stands: 80% of buyers in the market can’t purchase these distressed properties. Of course, when they rehab the property and bring it back to market, it’s fair game. 

Why should you be worried about this practice? If the investor is bringing to market a better product than what they initially purchased, what’s the big deal? Well, the reality is that some of these investors aren’t very good rehabbers. They cut corners to make a quick profit. It doesn’t happen often, but it certainly happens often enough. So, should you even look at flipped properties? The answer is yes, but with some important parameters. 

Here in our local market, we know some investors who have been flipping properties for years. They do phenomenal work, and we can recognize their quality product the moment we walk through the door. What if we encounter a flipper we’re unfamiliar with? 

Bad rehab jobs don’t happen often, but they certainly happen often enough.

As real estate agents, there are several things we can do for our buyers. First, we can look at the tax records to see how many flips a particular investor has done already. Maybe they’re an experienced flipper back in northern Virginia and they’ve come to southern Maryland simply because their local market has run out of inventory. 

If you find out that the investor is a first-time flipper, then I’ll advise you to buy that house nine times out of 10. Why? First-time flippers almost always overspend. Sure, there’s the possibility that they run out of money altogether and cut some corners, but we can check for that. Most likely, though, they poured way too much money into the home to make it look spectacular and won’t make much of a profit at all; you as the buyer stand to benefit from their over-improvements. 

Likewise, you should have no reason to fear the veteran flipper who has 30, 40, or 50+ flips under their belt. These folks know what they’re doing. They have a system. If you find an investor who’s done just a few flips, then it’s easy to track down their past work and scrutinize it. In theory, you could reach out to someone who has purchased one of their flips and ask them about the craftsmanship. 

Ultimately, any shoddy work or neglected items will show up on your home inspection report. Good home inspectors like the ones we recommend actually know where inexperienced or sloppy flippers tend to cut corners. For these reasons, you shouldn’t shy away from flips on principle. If you do decide to move forward with a flipped property, just make sure you don’t waive your home inspection. 

If you have questions about this topic or there’s anything else I can help you with, don’t hesitate to reach out to me. I’d love to hear from you.