Fliperati

Having done my best to extract as much information as possible from all the buyers who have walked through my flip, I have gained a great deal of insight into what I could have done differently to make this project more successful.  My initial thinking is that, while I understood the local real estate market in terms of what comparable properties are worth, I did not have a true understanding of what the majority of local buyers look for in a house beyond the number of bedrooms and bathrooms.  Although I did have a vague sense of what a typical buyer in this area would minimally expect, I still fell into the trap that victimizes many new investors: their own personal tastes and preferences. 

Under the heavy influence of my friends, my family and my own perfectionist tendencies, I think I spent way too much money flipping this house.  While I was able to turn a run-down, ugly property into a sparkling new home with luxury finishes on a renovation budget of only $42,000 (which is pretty small by New Jersey standards considering all the work that was done), I could have probably gotten a much better ROI on a $10,000 budget.  I have come to believe this because I’ve noticed that the majority of people who have looked at the house are 1^st time homebuyers who are really stretching their finances to purchase a house (oftentimes looking to move from nearby rental units) and space and affordability are more important to them than high-quality finishes and complimentary wall/trim colors.  Although this town is definitely an up-and-coming place to live and about one out of every eight potential buyers have come from the more affluent, discriminating background that I was targeting when I renovated this house, the vast majority of serious inquires have come from people with very practical, no-frills housing needs.

It’s amazing to watch one type of buyer come into the house and rave about how beautiful everything is while another type of buyer (more commonly) is entirely nonplused.  Granted, some of these buyers could be hiding their true feelings behind poker faces in an attempt to bolster their bargaining position if they decide to make an offer, but for the most part you can just tell that they genuinely have no emotional response to the property.  I must admit that this boggles my mind to a certain degree, but I suppose that just demonstrates how I didn’t totally understand the local market.  

For example, one of the most serious potential buyers (she turned every faucet on and opened/closed every window in the house) told me that the first thing she would do is enclose the porch if she ended up buying the place.  She said something about grilling sweet potatoes out there in the winter (???!??!!?).  She also seemed entirely ambivalent about all the lifestyle upgrades in the house, from the automatic icemaker in the bottom-mount freezer to the Silestone vanity-top with a 10-year warranty against stains, chips and cracks.  This makes me think that I will have a hard time getting these amenities to command the premium that I had hoped for.  I still think I could sell it to the type of person who would really appreciate all the details in the house, but it will take much longer to get enough of those people through the house to find “the one.”

In my defense, the neighbor across the street a few doors down has made similar upgrades to her home and it is really beautiful too, so it’s not like my property is a total anomaly.  Also, I consulted with other neighbors over the course of the renovation and they all seem to appreciate everything that has been done.  One neighbor often jokes that she would like to swap houses, and I think there is more than a grain of truth in her statement.  Unfortunately, house-swapping with her isn’t going to generate any profit for me, so I must press on and try to get this property sold.