Flipping is risky and tougher than it seems on TV, especially in Pittsburgh! More often than not, it usually ends up taking a bit longer and costing more than anticipated from entry to exit. Many home sellers we speak with consider flipping their own house as a possible option for selling.
Let’s break down what all goes into a fix and flip! (We’ll show you a detailed example with realistic figures at the end.)
Pittsburgh cash buyers typically see a return of 20-30% net profit, and a flip takes an average of 4-6 months from entry to exit. The less construction a property needs, the quicker you can sell it. This will shorten your timeline to minimize expenses and maximize profit! A home buyer in search of a flip won’t typically find the risk, time, capital, and effort worth it for anything less than a forecasted 20% net return.
There are 4 main components: Buying costs, holding costs, selling costs, and income tax
Closing costs (usually 3% if paying only the buyer customary costs)
Inspections: home, camera sewer, radon, pest, mold (if applicable)
appraisal (if applicable)
loan origination fees (if applicable)
Finders fee (if applicable)
Utilities (water, electric, gas, sewer, trash)
Construction (labor and materials)
Interest payments (if applicable)
Realtor fees (if applicable)
Closing costs (usually 3%)
Seller concessions/seller assist (if applicable)
25-35% of your net profit based on your ownership structure and tax strategy
Abandoned, vacant, and neglected properties are common around Pittsburgh. All too often, we connect with property owners who haven’t seen or done anything with their properties in several years.
Let’s discuss why you should never do this, and if you have done it, why you should take action immediately.
The reason why people do this is because the property may need costly repairs and have issues, there may be mortgage or tax default, or the property was taken over by squatters and non-paying tenants.
You can’t just abandon a property without risking or facing ugly consequences. Perhaps the biggest consequence is legal liability.
As long as a property is in your name, you are held legally liable for it. Imagine if someone were to enter the property, and claim that they became severely injured when meandering on your property, and you find out by receiving a startling piece of mail regarding a lawsuit from a personal injury attorney. There are unfortunately predatory people out there who look for opportunities like this to take advantage of.
Other important reasons why you should never abandon a property you no longer want:
risk of vandalism
water and moisture/mold damage from neglected roof/gutters
frozen and busted pipes from not controlling the temperature of the home or a brutal winter
Abandoned and vacant properties deteriorate faster
Easy target for a “midnight plumber” (someone who breaks in, breaks open your drywall, and steals your pipes to scrap for quick cash)
risk of code violations, fees, fines, and legal threats from your local code enforcement and municipality
angry and frustrated neighbors whose properties and well being are impacted by the issues of the vacant and abandoned properties next to theirs