real estate
You've heard the rags to riches stories, but flipping houses is a risky business full of potential obstacles. This sage advice will help you manage your home flipper's budget and expectations.
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Does flipping a house sound like a nice change of pace?
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Reality TV shows paint a great picture of how those in the home flipping industry make their money. Countless shows depict people putting homes up for auction or taking calls about rundown homes, buying them for next to nothing, renovating them, and selling them back for tens of thousands of dollars more. It sounds like a great business plan for a DIY enthusiast, and it could be. Before you commit to flipping homes, consider this advice for aspiring flippers:
Be sure to pay for a professional inspection.
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If you're not in the construction industry, it's easy to miss serious defects in a property, from a faulty foundation to old electrical wiring. Avoid costly headaches by having a professional inspection before you buy the property. The cost of an inspection is negligible compared to the expense of re-roofing or hiring a crew to fix structural issues.
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Obtain a building permit.
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While knowledgeable, competent flippers can renovate a home on their own, if they don't follow the proper procedures, they could find themselves embroiled in costly fines, lawsuits, and other complications that could cause the sale to fall through. For example, banks and mortgage companies won't necessarily lend to a renovated home that doesn't follow local regulations. Obtaining a building permit will give you peace of mind throughout the home flipping process.
Related: 10 Signs That Your Home Needs Repairs Could Be a Money Suck
Don't over-improve your home.
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When renovating a home, you might be tempted to add trendy details and upscale touches. But resist the urge. According to USNews.com, successful home flippers don't over-renovate their properties. The more money you spend on elaborate renovations, the higher you'll need to price the home to make a profit. So for properties that need fixing up, it's best to stick to basic repairs and basic functionality.
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Know when to seek professional help.
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Aspiring remodelers sometimes find themselves in situations that get out of hand during the renovation process. While replacing carpeting or painting walls are good DIY projects, other repairs require professional help. Hire a contractor for complete kitchen or bathroom renovations, electrical wiring issues, plumbing or HVAC repairs, or room rearrangements.
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Don't overlook the landscaping.
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Don't underestimate exterior curb appeal. No matter how much love you put into your home's interior, an unappealing view from the street could scare off potential buyers. You don't need to spend a fortune on retaining walls and raised flower beds, but you should take steps to make your exterior look appealing. At the very least, regularly mow the lawn, trim overgrown hedges, and remove yard rubbish.
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Create a budget before you lift the hammer.
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Flipping a house may seem like a game of sledgehammers and interior design, but the most important tool an aspiring flipper should have at their disposal is a spreadsheet. Outlining a budget for the entire project and each stage can help an aspiring flipper stay on track.
But don't expect to be able to calculate every dollar you spend. Leave some wiggle room in each category and adjust items as needed. This is a technique professional construction companies call “job costing,” and it can be used by amateur remodelers, too.
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Balance the quality and speed of work.
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The key to flipping a home is doing a quality job quickly. The longer a reseller holds onto a home, the lower their profit margins. A good reseller makes smart decisions and keeps the project moving forward.
But flipping a house is an art, and it takes time to master. Know the cost of labor, materials and other costs per square foot. Doing so can save time getting quotes and setting a budget, helping aspiring flippers move faster through the planning process and ensure a profit.
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Create a contact list.
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Flipping homes is a business, and anyone who wants to be first in on it needs to compile a list of contacts. Contractors, real estate agents, home inspectors, and material suppliers are obvious. But what about a list of potential buyers? How about the neighborhood watch? What about the local Chamber of Commerce?
Acting like a business owner and building a digital contact list will do two things for you: It ensures you always have properties available to resell, and it helps spread the word about your property before it hits the market. Nobody wants buyers waiting on the street before their open house.
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Don't forget to keep your work site safe.
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Home flippers are easy to spot from the street, and even well-meaning people know that no one is home at night. Just as a store owner protects their business with a security system and quality locks, home flippers need to think about security measures too.
First and foremost, always change the locks on any home you're buying with the intent of reselling, and make sure the windows and doors are locked before leaving the job site each night. It might also be worth investing in a security system or doorbell camera. Even if your insurance covers theft of tools and materials, theft and vandalism can kill momentum for a project and waste a reseller's valuable time.
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Rely on proven home design and decor.
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One of the worst things aspiring flippers can do is resell a home to fit their own tastes or current trends. It's okay to get creative, but straying too far from the norm will require a special buyer, and special buyers don't come around very often.
Instead, stick to tried-and-true classic designs that never go out of style. Traditional colour schemes and materials appeal to a wide range of people, drawing in more potential buyers once your property hits the market.
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