Being Licensed in the real estate business, one of the most common topics people want to talk about with us is flipping houses. For the right people, it can be the best option for a first house. For other people, it can be a great investment. Either way, it can be a great opportunity to improve your financial situation. Or it could be a massive headache that digs a financial hole. Hopefully, these nine tips can help you experience the former and avoid the perils of the latter. Here are nine tips to put into action before you flip a house.
This was the number one thing that came to my mind when putting together the list, it is the first priority to think about before you flip a house. This step should not take the most time but make sure you understand the effect every characteristic of a house and how it rolls into the value of the home. How does the school district affect it? What kind of lot does it have? Early on, in doing your research, be careful of “rose-colored comps” or comparable properties that are simply not in the same category. For example, while they both might have the same bed count and similar lot sizes- there are so many variables that can tweak a price, just because if the house is in the same zip code and has three beds, do not automatically assume that the house you are flipping will get an offer just like that when you are done. The market can change and move up and down but go through all the potential comps you can find so you can have a price range which then dictates everything from color to budget going forward. A good Agent comes in handy here.
This tip is HUGE and possibly could be considered an “insider” tip because it does not necessarily seem like the case until you experience it. While that super cheap three or four bedroom house has dreamy comps compared the little two bedroom cape that has middling comps, it never is as simple as “flipping this house will costs this much to buy, will cost this much to fix up and will sell for this much”. The main element is that these are all estimates and the bigger these fix-ups get, the bigger the range of outcomes is. The bigger the range of outcomes, the bigger the risk. It still is not only just risk though, but risk-averse people also do not normally decide they should flip a house, it is naturally a risky endeavor. There is no “one-size-fits-all” formula to follow. The main focus of this tip is that I have encountered and worked with different individuals but two extreme examples stand out;
This tip is fairly self-explanatory and you can find it said in various ways through the rest of these tips but it needs its own section to stress its importance. No matter how experienced you get flipping houses, always build a buffer because IT WILL NOT GO EXACTLY AS PLANNED. Yes, naturally you build a little buffer and you should honestly add 15% onto everything just to make sure you don’t spend more than you expected but no amount of prep work can prepare you for everything- one flip, they got it under contract, everything looked great, the flippers were ready to move on from it and the deal fell through. The sewage drain pipe seemed clogged, it was crushed underground and was not even making it to the road. This was after they thought the house was sold and there was mature grass already growing. THEN they had a several thousand dollar excavations and replacement project. That is an extreme example but plenty of flips have their own issues that cannot be prepared for, it is just part of the process that you have to be capable of handling.
This tip does not mean only do houses that are a “clean it, paint it, and replace the toilet” type flips. Those are out there and can make you some money, there are some other ones where the foundations are falling apart. If you know what you are doing and can be prepared for it, understand the value of good guts. There’s nothing like being able to keep great, sturdy parts of an old house when flipping. It looks great, it can even help sell it to some people. Overall, this tip put another way basically just says, good guts mean you have to spend less money.
This is very general advice but it is so true to think about before you flip a house. Be prepared for it not to go well. This is not doom and gloom point of view but as stated in previous points, things go wrong dealing with houses and structures. That is why it is not for everyone. An individual that wants to do multiple flips will have to be prepared to get through tough issues that you can’t expect. When you run into these issues, you have to be able to resolve it and move forward.
So taking from Tip #3, prepare for the worst and you think you finally have your project sold and it falls through because of a crushed sewage line in the back yard. The house sat on the market for another month after that, are you prepared for that to happen? That was after it went over schedule and sat for a winter. It’s difficult to predict what will happen in the real estate business but being prepared will help you deal with the issues that arise along the way. Because they do.
Being handy can be extremely helpful in this business, there’s sometimes where it is not worth it to go and hire out to get a project done, sometimes it needs an afternoon from someone handy. If that can be you, it can save a lot of headaches. Another advantage that is not exactly being handy per se, when you do hire out, you can check work and understand the difference between good and sub-par work. That difference with minor things can build up over time and really help sell a place if you have an eye for quality when you do a flip.
I do not know where to start without talking to some experienced people in this business. Not just contractors or realtors, and definitely not just watching HGTV, but talking to people within reach that can give you pointers and tips that can save you money and time (and maybe years on your life) with their experience. Shoot me an email if you want to, I am young and fairly fresh but I have some experience doing a few flips and I enjoy talking about it with other interested people.
This can be huge. I have done flips and I am also an agent, this is not an uncommon combination but having someone that understands that cheap houses do not always equal flip opportunities is very valuable. On the other side, an agent that understands the potential in a dilapidated property can be a make or break aspect to your team. I would love to help you get into the business whether helping from a distance somewhere else. If you are in Western Pennsylvania, I can work directly with you as an agent and advise on the flip.
One time, a guy came into my office wanting to get into flipping. It was a natural progression from the current business he was in so he wanted to talk about finding some flips. We talked but eventually, he was scared off because I also did flips. He thought I would take all the good opportunities and let me tell you, I would never do that for a client. Not just because that would not be putting the client first but because there are plenty of flips to be had, and if you want one, I am more than happy to be the agent that helps you buy it and later sell it. If that is my role in a flip, I will always be good with that!
Rob Sulava is a licensed real estate agent that has experience researching, managing, and laboring with flips. You can get in contact directly here.