Contrary to what many reality TV shows might lead us to think, flipping houses is not always rainbows and butterflies. Sure they make us feel like all we need to have is some cash and a lot of guts but there’s really more to house flipping than just that.If you want to get into the market of flipping a house – and make sure you turn out successful even at first try – be sure to read through our tips. Learn from our (very) unpleasant mistakes instead of going through it the hard way.
Essential Tips for House Flippers
1. Commit to the Process
The process of buying, fixing and selling a house is very tedious. It isn’t just about having guts; it’s also about having some stash of money, albeit a limited one, from your pocket, investors or a loan in the bank. Even the whole journey will be a unique and personal one. You might learn from our tips here but you will surely still learn a lot from the things that you will encounter.If you can, find someone who can act as your mentor, especially during your first flip. This might mean giving him a small percentage of your profit to motivate him to teach you the right things – but the investment will be well worth it.
2. Find the Right Property to Flip
Always look for the house with a price tag that is below the market value. This includes considering other factors such as the location. Properties near schools often sell fast as well as those found in great neighborhoods, near city centers or those with high employment growth. One of the most memorable houses we found was one with a huge oak tree in front. It almost had to be removed which would have taken away a huge value in the property and shooed away our potential buyers.
3. Figure Out How Much the Repairs Cost
Before you decide to close the deal of a fixer-upper, be sure that you have thoroughly inspected the house and figured out what repairs need to be done. Our biggest mistake was finding out that the drain field had to be replaced during an inspection, two weeks from closing the deal. What was even crazier was that we had been rehabilitating and remodeling the house for weeks without finding out any drain issues.When having repair costs estimated, be sure to add in 20 percent to the cost. We were fortunate enough that ours did not bloat as expected (it was much lower but it was still an unexpected cost) but in most cases, repairs will cost so much more.
4. Set Limits on the House Improvements
Always keep in mind that the house you are currently repairing is not yours to keep but an investment so you have to know your limits all the time. After finding out the drain issues with the property, we found out how bad it was: $5,000 bad. And that to the fact that we had just laid fresh sod and that the septic and drain field were located under a beautiful but massive oak tree that cost another $5,000 to remove – plus our potential buyers.
5. Maintain a good relationship with your contractor
We were fortunate enough to have been able to maintain a good relationship with our septic guys even before we asked them to help us with the repairs on that particular house. Since we had long been loyal to their services, we were able to get the drain field issue fixed by them for just $2,500. Plus we were able to keep the tree, too. Win-win!
6. Keep Both Inside and Outside in Great Shape
As you may have already figured out, we made a huge mistake simply focusing on the structure of the house itself as well as its interiors. We might have been blindsided by the massive oak tree that we forgot to check the other aspects of the house. Thankfully, we still had some wiggle room in both time and money. Otherwise, that huge investment would have surely been a flop!
7. Properly Clean and Stage the House
It was not enough that we had the house ready. The oak tree remained and, thankfully, maintained (and helped improve) the value of the house. However, the seller inspection clearly showed us that there were still a lot of things to do – and a major one at that! Not only should you be cleaning and staging the inside of the house as well as those that can easily be seen by the buyer, but you should also take the time to have the hidden ones checked to make sure that everything is in great condition.
8. List the House Right Away
There is a huge reason why you should not allow yourself to go overboard when it comes to the improvements being done in the house. You cannot base your selling price on what you have put into it but instead, on the price of nearby properties. Even if you did have an extra huge selling point (such as the massive oak tree), you cannot go and sell it way higher than the market value.Also keep in mind that flipping a house would most likely require you to negotiate and lower your selling price. Do not get angry when this happens or be too stubborn about it. If buyers find a flaw in your property, then fix it (just like the huge drain field issue we encountered); otherwise, be prepared to lower your price and let the buyers fix it themselves. Remember that if your house stays on the market for too long, people will begin to wonder why.
ConclusionNow folks, this is really just the icing on the cake when it comes to flipping houses. What we encountered is just one of the many issues you will probably face once you get into this business. However, once you have the basics down, it is most likely that you will end up successful – and get a huge profit in the process.