3 Obstacles to Flipping Condos Instead of Single Family Homes

When most new real estate investors get into this business, the main types of properties they focus on are single family houses. After all, the popular show is called “Flip This House”, not “Flip This Condo” (by the way, if you want to learn how to flip houses from my friends actually on the TV show, just click this link). Everyone pictures the typical 4-bedroom 2-bath house going through a major renovation and turning into a big flip hitting the market.

However, is there any rule that says real estate investors, aka ‘house flippers’, need to focus exclusively on single family houses? What about other types of properties — multi-family, townhouse or condo? Vacant land? Commercial?

There are many who shy away from townhouses and condos — many with good reason. Let’s look at some of the cons of flipping condos…

3 Obstacles to Flipping Condos

1) Associations — Yes, the dreaded association. When I talk with real estate investors who steadfastly refuse to consider flipping condos, this is almost always at or near the top of the list. They don’t want to operate under the rules of another interested party. After all, one of the joys of flipping houses is the freedom to renovate the house as you wish from the inside out, from the wiring all the way out to the mailbox.

2) Cookie Cutter Buyer Mentality — What I mean by a ‘cookie cutter buyer’ is someone who will value your property based largely on what the other units in the same building have sold for. Now you might consider this just a case of running great comps. After all, if the past three 800 sqft 2/1 condos in your Waikiki building have sold for $350,000, then why should you expect to sell yours for $380,000? Well, perhaps you upgraded it from head to toe, but in the condo world this isn’t often appreciated as much as in single family homes. Basically, it can become harder to set yourself apart from the pack.

For example, I’m flipping a double-unit condo right now in the Diamond Head Tower of the Royal Iolani (check it out here). Guess what? There are no other double-units in the entire complex. So much for cookie-cutter buyer mentality!

3) Limiting Forced Appreciation — This is related to the first point. Obviously when flipping condos, you can’t improve the exterior. No painting the outside, no installing a new roof, no landscaping, etc. When you flip houses, these items can go a long way in establishing curb appeal and forcing up the value of the house, something you can’t do with condos. Yes, the maintenance fees go towards maintaining these items, but there’s a difference in maintaining versus improving for a big ‘wow’ factor and higher resale price.

In tomorrow’s post, I’ll cover Why Real Estate Investors SHOULD Be Flipping Condos …. be sure to come back!

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