10 House Flipping Tips
Have you been watching all the DIY shows and think you are ready to give house flipping a try? The purchase of the property is the first and largest expense, however you must be able to afford any necessary Interest payments as well as renovating the house. Without having adequate finances to do this in a timely manner, you may struggle to make any profit. Here are 10 things you need to know before trying your hand at house flipping.
1. Financing your flip – Very few Conventional lenders will lend on a property as an investment. Private Money can be expense. Do you have the cash to do the flip, must be the first question you ask yourself. If you are doing a hard money loan, a private lender or a bank loan, know all the fees, prepayment penalties and monthly payments. A mistake in the financing could cost you all your expected profit.
2. Know your market – Make sure you know the market you are in. Do your research and make sure the property you are purchasing is worth the purchase price. This information will also help to ensure you do not over improve the property. Too many flippers think if they over improve, they will get more money, this is not true. When doing your research make sure to only include true comps and believe the research.
3. Time Management – It is extremely important that you create a timeline and stick to it. If you are trying to flip a property in four to six weeks custom items such as kitchen cabinet or high-end finishes are not always available that quick. The more expensive the home the longer your timeline will tend to be. Know the property and be realistic with your timeline. Always better to overestimate on time and cost than to underestimate.
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4. Property Inspection – It is always a good ideal to have a professional inspection. This will give you a list of items that need to be fixed. Sometimes these items were not visible and can greatly affect your budget. If the contract is contingent on the inspection, this will give you a way out of the contract if large, unexpected items come up on the inspection.
5. Know your city, state and local codes – When planning your flip, know if local building codes require permits for the work. If walls need to be moved, make sure your contract includes permits in the estimate. Permits can be a very costly delay if they are not obtained properly. Not to mention if work is done and not permitted, it will come up when the home is sold. You could be made to open walls to have it inspected and permitted properly.
6. Be resourceful – Have a back up plan. Items can taker than expected. Make sure you have a second option so that when something happens you can make up the time or cost in other places. If something takes more time or money than you budgeted for, make sure you have a place in the project to make it up. Always have a contingency fund, 10% of the renovation budget should be enough.
7. Know your limits – Too many flippers want to do items themselves. This is great if you are skilled at the project. Have your contractors and workers in place before you purchase a property. If you try to do too much yourself and fail to do quality work it can be more expensive to have the mistakes fixed, than it would have cost to have the job done in the first place. Teach yourself to do things in your own home, not on a flip.
8. Design Instincts – Not everyone is a designer. This is not the time to put all your personal style into a house. Be neutral and consistent. Paint the entire inside of the home one color, it will make the home seem large and will appeal to more buyers. Make sure all your fixtures match, such as doorknobs, kitchen and bath faucets, and lighting fixtures. The finishes in the home should be up to community standards. If every house in the area has granite, marble or other solid surface countertops, you should not put laminate countertops in yours. You want to be equal to or better than your competition.
9. Curb appeal – Too often flippers spend all the money on the inside of the house. Curb appeal is just as important. Have trees trimmed or even removed if necessary. Simplify flower beds, not every buyer has a green thumb. Consult a professional, even if only to get guidance on what to do with the curb appeal. Curb appeal is not just the yard. Does the exterior of the home match the interior? Again, neutral color is the way to go. Pick a neutral base and trim then pain the front door with a pop of color. This will give the buyers the best possible first impression.
10. Preparing to Sell – Are you a salesman? Do you know how to sell a house? Most buyers have Real Estate Agents. An agent that is familiar with your market will be able to market it more successfully. Homes priced properly will sell faster. Always consult the professionals, this will save you time and money. Always remember you got into this for the money.
These are the top ten items to consider before getting into a flipping project. In today’s world of social media, you can find great opportunities in local chat groups on FB and other sites. When considering your financing also consider private lenders and funding partners. Take Solid Capital Growth for example, we partner with you to ensure the flip is well funded and we offer many types of options. We have 39 years of experience and a multi-million-dollar portfolio to help you through all types of issues. We are local and here to help.
