The flipping game can be so rewarding. We often hear and meet so many people who say “I always wanted to do that” in so many social settings. Truth is, it is a fantastic business. But like any other business, it takes planning for good and bad times. one must be prepared for any change. During these times one of the biggest hurdles to get over is appraisal. It’s really important to know your market and more importantly, what appraisers are doing in it since appraising is subjective and faced with so many new regulations these days. In particular real estate investors need to remember that appraisals are only as good as the home performed for and literally the minute it was completed. To think anything else is not realistic.
That said, in a select few of our flips they can come in lower than expected regardless of current comps since appraisers take into account their opinions. In the lower FHA market, that can eat into profits regardless of any previous appraisal. It’s always best to factor at least 10% contingency into each flip. More importantly, keep in mind that real estate has many “moving-parts”. Murphy’s Law is its best buddy and appraisal can be only one negative factor.
This post is written by (me) Don Gilmartin in order to inspire the DIY, design & flipping community. As CEO and founder of Fliptechs I have over 20 years of design, construction, and real estate, experience to share.