The good, the bad, and the ugly of house flipping in Phoenix

Before showcasing the next featured property, an affordable and green remodeled home in Phoenix, I thought it would be good to elaborate on the diverse mix of fix-and-flips in our market and my feelings towards each.

Attractive home prices in Phoenix have caught the attention of several investors who have subsequently entered into the business of fix and flips.  These flip properties have become quite common, and in many cases, are a good fit for homebuyers looking for a move in ready condition home and don’t want to mess with the craziness of foreclosures and short sales so prevalent in our market.  I’ve noticed a varying different levels of a fix-and-flip home in the quality of the work done, depending on the investor’s goals.

The lowest quality remodel out there is typically just a barely scratching the surface, lipstick job.  They will typically limit the scope of work to painting the interior, putting in new carpet or other type of flooring, and on some circumstances redo the kitchen and bathrooms.  These guys either are inexperienced or are only in it solely for the money dreaming of big returns off of tiny investments, and it usually shows with low quality materials and poor craftsmanship.  These homes look good on the surface, but when you dig a little deeper problems with the house will usually present themselves which were hastily covered up.   Often times these will attract buyers quickly, but then the deal will fall apart as problems are found through the home inspection.

The next level of a remodeled home out there is one where whoever is completing the remodel is skilled at their work, choosing higher quality materials and everything is put together with a higher level of care and craftsmanship.  These are the ones that if a new roof was just installed, you don’t have to worry about it blowing away when a leaf rolls across the roof (which can’t be said for some poorly constructed flips).   Doing things the right way and not cutting corners is valued over a quick buck.  If there’s an issue that comes to light during the renovation such as plumbing or electrical they actually fix it rather than try to hide it an let the next guy deal with the problem, restoring it to a safe and working order.  And, in the end, they actually stand to make more because potential buyers are not going to getting scared off by things showing up during a home inspection and then spend more time trying to find another buyer.  In real estate, time is money.

The final type of renovated home you might find is one which I’m most excited about, the home where the developers/investors take a more holistic approach and see value not only in what they stand to gain from the flip, but what the future owners, the neighborhood, and the environment has to gain.   These are the guys who take things to the next level.  They make sure to use professionals in the renovations ensuring quality materials and craftsmanship like many other investors in the market, but also take pride in adding value to the neighborhood with house by house transformations.  There are several older neighborhoods in the Phoenix area with distressed homes providing the perfect opportunity to make dramatic impacts on street appeal and add value to the communities, while still maintaining the neighborhood character.

Finally, in my opinion, the cherry on top for the top tier remodel is showing showing an understanding and respect for the environment.  How much is the existing electric and water usage of the home and what can we do to improve the energy efficiency?  Does the neighborhood contribute to the idea of revitalizing our urban core and creating more sustainable, long lasting communities?   These green improvements aren’t just good for the environment, they’re also good for your wallet!

Done properly and with the right motivations flipping a house can have several avenues for return on investment, beyond making it just about the money.