Fix and Flip Advice
So you’ve decided to make the leap and start fixing up properties!
That’s great! But before you set out on this new venture, you’ll want to follow this advice in order to not only improve your profit margin, but alleviate potential stress. Adhering to these simple tips will help you make wise investments, and lead you to financial rewards.
Work with the Right People
Building yourself a good team will help you with the right outcome. Secure a good contractor you can trust and have a good relationship with. A solid contractor should be experienced, professional, and will provide you with accurate estimates.
Furthermore, you should also get a real estate agent who is experienced and understands the local market well. He or she can play a key role in securing the type of property you want, and help you obtain it at a bargain price.
A reputable lender and title company is also a must. At Northern Title, we are committed to thorough title searches, title clearance, and insurance to help clear property titles and enable the efficient transfer of real estate.
Get an Inspection
One of the biggest mistakes homebuyers make is foregoing a thorough inspection of a potential property. Depending on the size of the house, inspections can range from $200-$400. A few hundred dollars is nothing when you compare it to financial disaster when a flip goes wrong.
Having a proper inspection will give you a better idea of the problems associated with the property. It will also help you better understand how much money is necessary to make the house habitable.
Set a Realistic Budget and Timeline
If you’re solely flipping a house for profit, not to dwell in permanently, then you want to have a realistic budget and timeline. Home buyers should carefully and accurately calculate their profit margin on any flip, then weigh that against their renovation costs. Anyone who has ever flipped a house before knows that there are always surprises, so it’s best to be prepared for those. Experts suggest setting a 10% buffer in your budget for these unexpected expenses.
Additionally, if you don’t have a finish date in mind, your house will drag out and sit on the market. Remember, if you didn’t purchase the property with cash, then that’s less money in your pocket each day the house sits on the market.
All About Location
Before purchasing, scope out the neighborhood. Is it a desirable area that would appeal to more buyers? Is it clean? Is it noisy or heavily trafficked? Does it have easy accessibility? What kind of amenities (like shopping and activities) are offered nearby? These are just some of the questions to consider. Moreover, you want a home surrounded by other homes that are in good condition as well. Nobody wants to buy a house that sits next door to a major eyesore.
Invest in Smart Renovations
If you’re inexperienced with flipping, try focusing on properties that need mostly cosmetic improvements first (rather than major overhauls like: plumbing, electrical, or structural/ foundation issues). Unless you know how to fix homes with big issues like these, you will likely lose the money you’re investing, as well as any potential future profits.
Invest in homes where lower cost improvements can have a greater impact like new paint, new carpeting/ flooring (or refinishing hardwood floors), replacing trim, updating appliances, and updating light fixtures and hardware.
Do the Work Correctly
Don’t ever skimp on repair work as it will only come back to bite you in the end. If you’re new to flipping and don’t know how to repair something, don’t be afraid of hiring the job out. Too often inexperienced flippers attempt a repair, only to have it not pass inspection and have to re-fix it, or hire a contractor to fix it for them. Although you may assume it will save money doing everything yourself, you may be costing yourself more money if done incorrectly.
Fixing and flipping houses takes patience and time. With the right kind of partners, you can make a real profitable income.