Those new to flipping houses are likely unfamiliar with the process (except for what they’ve seen on Flip or Flop). There is a cyclical pattern, though, one that can be seen repeated each time you move on to a new project. Understanding this pattern can help you prepare for, and be more successful at, the process of flipping a property.
1. Picking the Property
It obviously all starts with the property. In order to execute a flip, you have to take a property that’s worth less than those surrounding it, and then turn it into something more comparable to the market value of the neighborhood. This requires some research, and a lot of looking. You want something distressed, but that won’t cost more to rehab than it’s worth. You also want to pick a neighborhood where you’re not likely to outstrip the value of the neighbors’ houses.
You can go about this a lot of ways; working with real estate agents, looking for houses at auction, and so forth. Find a property that has some potential, in a neighborhood that’s likely to attract buyers, and remember the golden rule of flipping: never be the most expensive property on the block.
2. Planning the Rehab
Once you’ve picked your project, it’s time to make preparations. Plan out carefully what you’re going to fix, rehab, remodel, replace, update, and undo. Draw up a strict budget (based on multiple quotes from qualified contractors), and commit to sticking to that budget. There should be firm expectations of what the property will look like when complete, and just how much it will cost to make it happen (though be sure to include about 15% of flex in that budget for surprise concerns).
If you haven’t already, build your team, including the contractors (who you should be vetting to find good ones) that will complete the work you’re not qualified (or willing) to handle. Acquire the proper permits necessary for the work to be done, and make sure everything is in order for work to begin.
3. The Part Where You Do the Work
Finally, it’s time to begin executing the plan. You may be doing some of the work yourself. You may be leaving a lot of it to qualified contractors who have the experience, tools, and manpower to make it happen faster and more efficiently than you can. Regardless of who’s doing the work, there’s going to be work to be done, and there’s likely going to be hiccups, surprises, or mistakes along the way. Be prepared to handle the bumps in the road as they come, and try not to get overly stressed by them. Every project has them; just roll with it.
4. The Final Walkthrough
Once the work is done, it’s time to inspect everyone’s craftsmanship to make sure all is in order. This is your very last chance to fix problems if you find them, so be thorough. Make sure all the mess is cleaned up, every item on the list is finished, and there’s nothing left to complete. It’s at this point you’ll probably be paying all of your contractors (and potentially deciding if you’ll be reaching out to them on future projects).
Once you’re satisfied with the work that’s been done, it’s time to start prepping the house for sale.
Staging is an art all to its own. Knowing how to set up a property to look appealing to the majority of home buyers takes an eye for design and interior decorating. You’re not renting out an apartment here, you’re trying to help buyers envision what the space would look like as a home.
Just as you want to avoid extremes and eclectic choices during the rehab process, you don’t want to stage the home with too specific a style. You’re aiming to appeal to a wide range of buyers, and you don’t want that old victorian armchair to inadvertently turn people away.
6. Sealing the Deal
Finally, you’re at the end of the journey. You’ve found a buyer willing to commit, and it’s all a matter of negotiating the price of the property. Knowing what your work is worth, and knowing how far to push in negotiations are skills that come with time, but it’s good advice to avoid extremes. Don’t take the lowball offer, but don’t press for every penny you can. Be flexible, and know when to take a good offer that nets you a respectable profit.
Remember, even if you profit a little less on this project, there will be more projects to come, and more opportunities to earn what your work is worth.
For more tips on successfully flipping houses, contact the pros at Real Estate Elevated.