3 Tips for Each Stage of Your House Flip: Beginning, Middle, & End
Plan Ahead to Keep Your Real Estate Investment on Track
The best houseflippers keep their projects moving quickly in order to stay under budget and avoid carrying costs. Delays will always cost you money, but moving too quickly without planning ahead for each stage of the houseflip can lead to missed opportunities or lost return on investment (ROI). In order to keep a fast turn-around time for your property, take some time to look forward and plan the things you can start today to set yourself up for success. Here are some tips from us to keep in mind for each stage of your flip.
Plan your way to real estate investing success!
Tips for the *BEGINNING* of Your Real Estate Investment:
1. Look for the smallest house in the nicest neighborhood.
Many people look for the most distressed house in an area to physically restore and improve. While this is a great strategy for purchasing at a low cost, there is only so much value you can add to a standard-sized house for any given neighborhood.
Another, more lucrative strategy in the long term is to look for a property to which you can add square footage without exceeding the neighborhood average. By finding the smallest house, you can raise the property value to the rest of the larger houses that surround it with additions. This is an easy way to maximize the ARV of a property.
2. Once you find your property to flip, PAD your rehab budget.
Nothing stalls a project like running out of funds. While your lender may be flexible if you can make a strong case for the ARV of your property, you’ll end up losing a lot of time if you are negotiating a new loan and/or delaying paying invoices during the project. Keep the momentum up by building in a buffer of funds for the project.
(Note: RFG always recommends a 10% buffer when calculating rehab funds)
3. Compete with all cash buyers by getting pre-approved with Rehab Financial Group.
In fast moving markets, cash talks. Sellers don’t want to wait for the buyer to get funding approval or accept an offer that the buyer can’t support. Although it is hard to compete with an all cash offer, you can prove your ability to pay for the property by getting pre-approved for a fix and flip loan with Rehab Financial Group.
We’ll approve you for a maximum loan amount, and as you need to make an offer on a property, provide you with a proof of funds letter in the amount of your offer. Pre-approval is a great way to compete with all cash offers by thinking ahead. Read more about our approval process here.
Tips for the *MIDDLE* of Your Real Estate Investment:
1. Don’t overestimate your DIY skills.
If you are a skilled tradesman, you can save a lot of time in the course of a houseflip because you won’t have to reserve your contractor’s time or find a replacement professional if they leave the job you’ll take care of all of that. The opposite is also true though: if you think you are going to handle certain trades like plumbing or electrical and end up having to hire someone to start from scratch or undo the work you attempted, you’ll lose both time and money.
It’s best to be realistic about what you can and cannot do on your own, and always plan a backup (or two) in case you need an extra set of hands in a pinch. Even if the first contractor you hired bails or flakes on you, it’s better to have a backup plan that doesn’t involve you having to learn how a new trade overnight to keep the project on schedule.
Unless you are a professional tradesman, contractors are almost always going to be faster, less accident prone, and more skilled than you are on advanced tasks.
2. Start looking for buyers as you start your renovations.
That’s right – start looking and advertising now! While realtors are great at hosting open houses once everything is in place, you can start the momentum of word of mouth and generate some buzz for your property in local circles. If you start the sales process mid-renovation, you’ll have the interest you are looking for from buyers on *day one* of availability. If you wait too long to start planning the sale of the finished property, you’ll likely have an empty house waiting for attention for several weeks.
3. Start looking for used, high-end appliances right away.
Buyers love appliance upgrades and are willing to pay a premium for better quality machines. You can usually find sets of high end appliance for sale in used but excellent condition for about the same cost as new, lower quality pieces. The catch here is that you have to be on the lookout and patient for the right deal to come along, so it’s a good idea to start the search early. This is usually a little easier in metro areas, but you can find some great deals wherever you are.
Tips for the *END* of Your Real Estate Investment:
1. Don’t leave curb appeal as an afterthought.
Some houseflippers get so involved with the inside of the house and how they are adding value to the living space that they forget to plan and budget for the outside landscaping and curb appeal improvements. This is a huge mistake because buyers will be imagining themselves living both in and outside the house when they are deciding to make an offer. In fact, the way the house looks from the outside will be making the first impression so you’ll want to make sure it looks good.
Special note: If you live in a seasonal area, some outdoor work will need to be scheduled during the right weather conditions. For example, pool resurfacing, concrete pouring, and house painting all need to be done in warmer temperatures. Plan ahead to avoid delaying putting your property on the market because you are waiting for better weather.
2. Plan your financials around a 1-2% discount in exchange for a quick sale
A small adjustment in price can mean the difference between a quick, profitable sale and having to cover the carrying costs of the house for several extra months. Talk to your real estate agent ahead of time to be on the lower side of your ARV listing [VIDEO: What is ARV?]While it is tempting to push up the asking price up to increase your ROI, you’re more likely to lose money by incurring another interest payment, tax payment, and all utility bills.
3. Find a professional photographer to capture the beauty of your property.
If you wait till the last minute to snap some photos with your phone, you are making a huge mistake. Several weeks before the house hits the market, start searching for a professional photographer to capture your home in the best possible light. Professionals will have both the equipment and artistic eye to take amazing photos for your listing that make it look like the gem you created.
If you can’t find a local architecture photographer, you might try local art schools or even search Instagram for #photographer – you’ll be able to see peoples’ portfolios immediately and contact those with the best photos.
If you are relying on your realtor to provide pictures, make sure they are hiring a professional photographer to take them and not taking them himself. You want the pictures accompanying the pictures to be as clear and professional as possible. If your realtor is not willing to spend the money for a pro, it may not be the right realtor for you.
While all of these ideas will help you no matter when you start them, they are all things that can save you time and headaches by getting an early start. Add reminders to your calendar several weeks in advance for each of these to-do’s!