House “flipping” has become the American obsession these days. After all there are entire television series on the subject! Here’s a user friendly set of guidelines to help you “flip” a house.
First, select the property. If you are going to flip the home you live in, be realistic about the inconvenience you can survive. Many a home owner has had to stop in the midst of renovations only to personally be inconvenienced beyond what they can handle. The stress involved when flipping a project can be enough without having your entire living space in turmoil.
I think it’s preferable to flip a home that is unoccupied. This will allow you to complete work much quicker and accomplish multiple projects at one time. Do your homework when selecting a property. Learn about the neighborhood. Here are some questions to get you started.
How many homes are on the market now?
What is the average sell price?
How do they compare with your property?
What is the demand for housing in this area?
What types of features does your property have that will make it stand out?
What can you do to differentiate your property?
Knowing what the market will bear is EVERYTHING when flipping a home for profit. Don’t jump in without a decent understanding of the market. Also, make certain you have a marketing game plan to sell the property. Many people skip this step and think buyers will flock to your house once you’ve fixed it up. That just won’t happen without a sound strategy to drive prospective buyers to see all the wonderful things you’ve done.
Second is establishing the budget. I know this sounds like accounting drudgery rather than the flashy real estate investing you’d like to focus on. Trust me, this is what makes it an investment (income producing) verses a liability (income draining). No matter how great a property is, or how skillful you are at rehab, if the numbers don’t work, the project just isn’t right.
Make certain you can purchase the property, pay for the improvements and sell for a profit. Be realistic about what things will cost. If you don’t know for sure, research, research, research! Don’t just guess. Also, take into account the time frame involved. Can you “flip” fast enough to avoid a payment? (Usually about 30 days) If not, add the cost of the payment(s) to your overall expenses to make certain you will be profitable. Also, don’t be afraid to hire labor. Many first time “flippers” try to do it all themselves to save money. If it takes you 2-3 months to do it yourself, see if hiring others to help you do it in 30 days is less costly than the carrying charges for each month.
Third, do what you know. If you have an eye for landscape but not kitchens and baths, then ask for help. Many home improvement centers offer free design and layout services and will gladly give you ideas and input. Many times they will make suggestions that will save time and money. I also find they will often point out a concern or issue that I hadn’t thought of (like plumbing upgrades or electrical issues.)
Lastly, don’t be afraid to network. Many contractors will do small quick paying jobs in between larger projects. I have a commercial painter who will do interior painting for me when he’s slow. He does great work, is really fast and almost always works my small projects into his schedule. I have a number of skilled tradesmen who help me out “on the side” that don’t mind working nights or weekends for quick extra cash. Since I keep my projects fairly small, and they know I’ll work with their schedules, I get discounted pricing. Additionally, many of these folks will help get the word out about the property once it’s ready to sell.
If you remember these very basic but necessary steps, flipping houses for fun and most importantly profit can be very rewarding.