Many of us who watch HGTV think the idea of flipping homes is an easy & fun way to make money. HGTV does an AWESOME job of showing the glamorous side of the flipping world. Today, I want to talk about the process that goes into the purchase of a house with the intent to flip it.
REVIEWING HOUSES
Step 1: You've got to review your options. There are many homes that need updated (and I mean MANY!), however, not all are good candidates for a flip. So once you've reviewed the prices, you need to take the following into consideration:
- Location
- School district
- Lot
- Layout of house
- Amount of work that needs to be done
Step 2: Make a short list of the homes you think have potential. Do a full market analysis on each of these homes. Look at the list price, the amount other homes in the area are selling for, the amount of money you realistically think you'll be able to put into the house. Look at the length of time the home has been on the market & the sold history & what you think you'd be able to list it for when it's complete.
Step 3: Make an even shorter list of the homes that are actually viable based on the above considerations. Ones that look like you could buy at a good price, put some money in and sell rather quickly for a solid profit.
VIEWING HOUSES
Now it's time to go see these homes in person. Here are a few pointers to keep an eye out for when you go into these homes:
Pointer #1 - Bring your contractor, realtor &/or designer (if you work with one).
Pointer #2 - Look at the layout. Look for a house where you don't have to move any major load-bearing walls. Look for a house with good flow already, it will make your flip much smoother if you don't have to move everything around!
Pointer #3 - Go room by room & make a list of the updates that each would need so when you go back to crunch the numbers, you know what you're looking at. Don't discount the mechanicals, exterior & roof - those can be costly items if they need updates, repairs or replacements, so that will have to be factored in to your final numbers.
Pointer #4 - Keep the character & charm of the house (or add some if you can). Don't go overboard with demo. Some of the original features may be great to keep like built-in bookshelves or curved archways & they save you money at the same time!
Pointer #5 - When factoring in the updates, be realistic, using materials & a layout that works to enhance the house, rather than just knocking everything down and putting cookie-cutter materials in it. Details do matter.
Pointer #6 - Don't go overboard. It's a flip & while you want to put in good quality materials & workmanship, you are doing this to make money. So make smart decisions (go with white or dark stained cabinets rather than an exotic wood, put a thicker carpet pad down and go with a less expensive carpet, select standard size appliances/vanities/tub/showers so you don't have to do customization builds around these items.) None of these suggestions include using inferior products or cutting corners on workmanship. It's simply a matter of making smart decisions.
Pointer #7 - Inspect the property thoroughly. Know exactly what you're getting yourself into before you jump in with both feet.
BUYING A HOUSE
Your realtor should be involved from the word go! We are a great resource, we know what sells, we know what doesn't. We also know contractors that you may need to contact throughout the process of the flip. We can also do continued market analyses for you to make sure that you're hitting the market at the right time, with the right stuff in the house to get it to sell for top dollar!
DOING THE WORK
We understand that the goal of a flip is to make some fast money, and we're all for that. However, please do not cut corners. It will show in the quality of the work & if it doesn't show there, it will be revealed in the inspection. Start off your flipping career by using quality materials, licensed & experienced contractors & warrantying the work you're doing. This will help to ensure a positive and strong reputation in the real estate community. The more community members that believe in your work and can vouch for you, the more desirable your flips will become!
If & when you find that right flip for you, assemble your team: your realtor who knows the market inside & out, your contractor who you trust to do the work in a quality manner, your designer who knows what appeals to the masses & is able to bring out the best in any type of house, your financial planner so you know what you're comfortable spending & your personal support team (because inevitably there will be stressful times throughout the process). Each person plays an intricate role in helping your achieve your goal. Plus, when you put a solid, trustworthy team together, you can rest easy that the outcome will be positive.
Are you considering getting into the flipping market? Call us today so we can help you evaluate your options!
