The Biggest Surprise for First Time House Flippers
Oops! I Didn’t Think of That!
At Rehab Financial Group, we speak to first time home rehabbers on a daily basis. We’re most likelyoffering tips on how to get started flipping house and there is not a single day that we do not hear “I didn’t think of that” from one of our customers when discussing costs. The best way to lead you on the path to success in house flipping, is to plan for the worst, and hope for the best. This is our best advice on how to start flipping houses.
Without fail, rehabbing and flipping always takes longer and costs more than you think it will. You should start by making a very conservation timeline for how long it should take to rehab the property and then add an additional 20% to that timeline to cover unexpected delays, which will surely occur. It could be something as simple as a delay in getting approval on your rehab permits. Next, “cost out” each month on your timeline. How much are the closing costs if you are taking out a loan? How much will you need to pay monthly for a loan you may have for the property? How much are insurance and taxes monthly? How much will you need to pay your contractor? How much are the monthly utility bills going to be? You need to make sure you have enough access to cash to sustain you through the project.
The successful home rehabber is one who has thought about everything, and has minimized the unexpected. Even then, however, things will occur beyond your control, and the key is having a game plan to manage them. Never plan a project that will take you down to your last dollar, because something can, and will, go wrong. You need to have emergency cash for just such situations.
At Rehab Financial Group, most of our borrowers are realistic in their budgets and expectations. On occasion, however, we have a borrower who has not fully thought out the cash needed to complete a project. Invariably, projects take longer than expected, and the borrower who has not planned finds themselves without funds to carry the property through completion. When problems like this occur, default on the loan and/or loss of the property is a distinct possibility.
With a solid plan and a good financial footing, you can rehab a house with minimal risk and maximize profit potential.