House Flipping 101: Do you have what it takes?
If you have ever turned on any home improvement channels, you most certainly have noticed the absolute barrage of "house flipper" shows, which dramatize the world of home renovations. Let's face it, these shows are on TV because they are entertaining and can get you hooked. I know that years ago, when I was a new house flipper, I would spend lots of down time watching, learning from their mistakes, and hopefully getting ideas and becoming inspired for my next project.
With market ups and downs, interest rate vacillation, and building material and labor costs uncertainty, it can be overwhelming deciding on which property to purchase, what direction to go in as far as design and theme, and the all-important BUDGET. Thankfully, at this point, material costs have evened out and the market has stabilized, so it is easier to budget now vs in 2020/2021 (let's try to forget that unfortunate time!).
There are several important questions to ask yourself before you even begin.
How much work are you willing to do yourself?
What level of skill do I have?
Are you willing to learn?
Do you have the resources to pay tradespeople to do what you cannot?
How about friends that have the skills you are lacking?
Painting and putting down floors are skills that can easily be learned by many people. Electrical and plumbing, though? These are skills that if you make a mistake could cost you dearly (imagine flooding your entire house or getting a terrible shock!). Plus, looking ahead, buyers usually have a home inspection that will pick up any important mistakes that were made. When in doubt, pay a pro! Our team of experts at Next Door Realty Group have many professionals at our fingertips…call us and we can point you in the right direction!
Aside from having some flipping skills, what is even more important is which property to purchase. I know that when I started flipping homes, my motto was "You make your money when you buy the home!" I knew that I had to buy the property at a low enough price to ensure a reasonable expectation of profit when it was sold. I had to have enough knowledge about what it would cost to do the work needed, keeping in mind the list I made when I went to see the house. Normal items often would include:
Roof (new or fixes)
Plumbing
Kitchen
Baths
Interior paint
Flooring
You also have to consider any structural issues that would need to be addressed, landscaping, exterior work (siding, painting), gutters and downspouts, water intrusion in the basement if any, electrical issues, light fixtures, plumbing, finishing basements or bonus rooms, etc.
After making a list and making a budget, you should always include about 10-15% extra for unforeseen items. Adding square footage, bedrooms, and bathrooms, when possible, usually pay out in the long run, but you should keep in mind the top price that particular neighborhood... Are you going overboard on a home that will never sell for the price you think it will? Make sure you check out the latest neighborhood sales to ensure you are still within realistic goals.
All-in-all, it is an amazing experience working and beautifying a home and producing an end product you can present to the public that you can be proud of. Don't worry if it is your first time - you are learning! You may excel at flipping and find a source of income you never expected to have, as I did. One thing is for sure, it will be a memorable experience that, if done correctly, will probably make you a tidy profit. You will gain skills and knowledge you will retain for a lifetime. You will probably, also, make an amazing home for someone to love!
