ABCs of Flipping Houses
Flipping for the first time, is a daunting task. First are the surprises that come with the house that was purchased. Then there are the hidden expenses that show up when the renovation begins. If that wasn’t enough, then there is the wait that comes with trying to sell the home and wondering how the people that helped do the renovation are going to get paid during that wait time. As there are costs associated with everything that is done in a flip, what follows are tips seasoned flippers have learned.
1) Get an Appraisal. The point of any flip is to make money. Buying the best house in the neighborhood and then adding to it only prices the home out of the market. The appraisal will reveal how much the home is currently worth, and how it compares to other homes in the neighborhood. Turning an eyesore into a competitive house will get the flipper more money for the dollar spent.
2) Budget wisely. Remember where the property sits and make renovations accordingly. Consider who lives in the neighborhood, who the target customer is, and factor that into the renovation. Bathrooms and kitchen remakes will bring in more profit for the home that tearing down walls to make a bigger bedroom. Take in consideration the cost of the labor involved in making the renovation. Consider having someone who is skilled in the trade to do the work. Small mistakes may end up in costly fixes.
3) Contracts are Important. Have a contract for everything. Make sure that in the contract it spells out exactly what the person is hired to do. The contract should include labor, items purchased, time frame to completion, and time and form of payment. Hold the contracted person to what they signed for and if they presented the contract, read it carefully. Inspect the work as it is being done, and demand that the work be completed to the specifications written in the contract.
There are several homes on the market that were started by a flipper and then sold in the middle of the renovation. This happens for two reasons: The flip exceeded the allotted budget or the flipper took on something he was unable to finish – he couldn’t do it. Part of making a flip happen is to listen to those who know what they are talking about, being able to haggle over price, and not giving up.
4) Determination. There are several homes currently on the market that were started by a flipper and then sold in the middle of the renovation. This happens for two reasons: The flip exceeded the allotted budget or the flipper took on something he was unable to finish – he just didn’t have the determination to do it. Understand that flipping houses is not an easy way to make a living, and that there is considerable risk involved. Part of that risk is if the project is not completed in a timely fashion. To get the profits sought after, the flipper has to have the determination to see the flip through.
Flipping is a risk even for seasoned veterans. Keeping the excitement going when unforeseen repairs occur, or a contractor backs out of an agreement might be difficult. Through careful research and following the advice of those who have been successful at it will help the new flipper on his way to success.