Making sure we don't repeat mistake

9 Replies

We flipped our second house (did several manufactured homes first), and hopefully closing next month. Not going to make much, and trying to figure out why. The house went on market 7/1/17. So the HML payments really gnawed at profit. Started at $155k, selling for $134k, and glad to escape!

The feedback we got from buyers centered around two categories:  Price (too high), and Layout (didn't like).  I don't get why the price was considered too high, as it was in line with similar houses on the market.  We actually had a full price offer within days, but it fell through.  Buyers had an offer on a different property that came back on market.  Ours was a 3/2, the one they bought was a 2/1.  Not updated, $30k less, smaller, same neighborhood.  It seems buyers here don't place any premium on renovations.  We are thinking for our next flip we will do less reno, less cost.  

The layout seemed to be the biggest problem. It has two baths, but not a true master bath.  Otherwise, it had a kitchen open to family room, so somewhat of an open layout.  Is a master bath that important to buyers?  How do i find out exactly what the problem is when the feed back is so non-specific?  

@Amy Prosser

Shop the neighborhood and see what homes are selling for what prices.  Do they have more or less space, is the kitchen, the master, and master bath better or worse.  It sounds like you are missing something.  Without knowing the area, I couldn't say what it might be.

@Amy Prosser ,

Do you have pictures of it?  Pictures of comps? I'm not a flipper,  and don't know your market, but maybe the demand is stronger for cheaper, so maybe look into how you can offer cheaper options?   maybe laminate, or buying stuff  and rehabbing it?     Kitchen sells the house, and people act on emotion... I can't tell you how often the back splash is the first thing people notice and comment on, it could be the cheapest feature in the house.. but people like shiny, cool.. all emotionally based.

 If someone picked $30K less,  I wouldn't factor it too much, b/c yours was not the best fit for them.   Hope this helps!

My experience with new construction: buyers pay for the following, more or less in this order:

Location

Square feet

Basic amenities

Upgrades

Location - if the house isn't in the right area, it will have trouble no matter any of the other three. Location might include school district concerns, though usually that goes hand in hand with better neighborhoods.

Square feet - buyers want the biggest house they can get for their money. There is some evidence that suggests this might be shifting a little bit for millenials et al, but I still think size is king here. 

Basic amenities - aside from normal stuff (no one wants a house without central HVAC), things like master baths, plenty of closet space, kitchen island, clean outdoor space (deck or patio), etc. 

Upgrades - fancy countertops; fancy appliances; upgraded carpets; high-grade insulation; etc. 

I got killed on my new construction partially because I spent a lot of money on #4 (because I was going to live in the house) and couldn't compete on #2, and somewhat #3, with developers in the area. 

You noted you don't have a master bath. Buyers today want a master bath. Even cheapo Section 8 apartments today have master baths. 

Originally posted by @Amy Prosser :

We flipped our second house (did several manufactured homes first), and hopefully closing next month. Not going to make much, and trying to figure out why. The house went on market 7/1/17. So the HML payments really gnawed at profit. Started at $155k, selling for $134k, and glad to escape!

The feedback we got from buyers centered around two categories:  Price (too high), and Layout (didn't like).  I don't get why the price was considered too high, as it was in line with similar houses on the market.  We actually had a full price offer within days, but it fell through.  Buyers had an offer on a different property that came back on market.  Ours was a 3/2, the one they bought was a 2/1.  Not updated, $30k less, smaller, same neighborhood.  It seems buyers here don't place any premium on renovations.  We are thinking for our next flip we will do less reno, less cost.  

The layout seemed to be the biggest problem. It has two baths, but not a true master bath.  Otherwise, it had a kitchen open to family room, so somewhat of an open layout.  Is a master bath that important to buyers?  How do i find out exactly what the problem is when the feed back is so non-specific?  

How do i find out exactly what the problem is when the feed back is so non-specific?

Ask the people directly who left the feedback  exactly what they meant 

So it sounds like the consensus is that it was the lack of a master bath?  That's our take too, and we will be prepared in the future.  Many houses here are 3/1.5 in this price range.  Most of our competition had few to any renovations, most homes in this range don't.  We did new kitchen and baths, even cabinets, new flooring & refinished the hardwoods, new HVAC, granite kitchen counter, etc.

Originally posted by @Amy Prosser :

So it sounds like the consensus is that it was the lack of a master bath?  That's our take too, and we will be prepared in the future.  Many houses here are 3/1.5 in this price range.  Most of our competition had few to any renovations, most homes in this range don't.  We did new kitchen and baths, even cabinets, new flooring & refinished the hardwoods, new HVAC, granite kitchen counter, etc.

 I do basically the same renovations

If I find a house and plan to do those renovations the price of the house should be max 74k and comps selling for approx 150k

If buying for 50k and comps selling for 110k I just do new paint inside and out, new A/C, floors, paint cabinets, paint outside, landscaping and fencing no new cabinets

No new A/c

Price is ephemeral and it is what the market will bear, regardless of what has sold on that street or what you put into it. I had a property that I listed for $380k, had full price offer 1st week. They dropped out because the drywall was not perfect where I had removed a wall and patched back in the drywall instead of re-drywalling the 10 feet. Lesson learned. Sold 2 months later for $360k.

Kitchens and baths, kitchens and baths, kitchens and baths sell houses. No master bath is usually a big problem for most buyers. Secondary baths are not as important, but I go all out on kitchens and (master) baths. I'll usually use less expensive tile or reuse cabinets in secondary baths. 

I would have considered making it a 2/2 if I could take the 3rd bedroom and make it a nice master suite with bath.

There are no right or wrong answers, this is all a risk. 

MY opinion is that you chose the wrong neighbourhood to do a flip. Buyers in th at community are not looking for anything beyond a reasonably priced roof over their heads.

Next time look for a community that is turning flips regularly.

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