Time Is Money
The longer the property is held, the more costs are incurred.
The math is simple, the longer your house flipping project takes, the less money you will make. That is why it is so important to be over-prepared from the start with a rock solid property investment plan.
Everything related to property ownership costs money. If you financed your project, interest is accruing every day. Even if you paid cash, your money is not earning somewhere else. Real estate taxes will be due and insurance premiums need to be paid. Utilities need to be turned on and, and don’t forget that the lawn will need to be mowed in the spring, summer and fall, and sidewalks and driveways shoveled during the winter. Every cost incurred will eat into your profit.
Make sure that you know how long your house flip will take. If you need permits, make sure you know how long the permitting process takes in the municipality where you are. Ensure that your contractor is ready to go when you take ownership of the property. You do not want to find yourself in the position of owning the property and paying expenses for it long before it is going to be worked on.
In addition, a vacant property undergoing renovations is an invitation to vandals, scammers and other criminals. You will need to spend money to make sure that your investment is safeguarded. You need good locks, possibly a security system and some common sense. Do not leave valuable appliances or tools outside, or in plain sight. Cover ground floor windows. Make sure that everyone with a key to the property can be trusted. If you fire someone working on the property, change the locks. The need to secure your assets cannot be overstated.
Because there are so many different specialists that work on house flips, make sure that you have your schedule lined up ahead of time, and that each party is adhering to the schedule.
For example, electricians and plumbers may be needed to rough out the plumbing and electrical, but they cannot do so until the framer is done. Once the electricians and plumbers are done, you will need the drywall installed to close up the walls. Finally, you will need the electricians and plumbers to come back to do the finish work. Everything depends on the completion of the step before.
If all of the steps are not outlined and accounted for ahead of time, you may be in the position that your specialists are not ready when the job is ready, which can prolong your entire project. A typical flip can have up to ten different tradespeople work on the project. If there is a lapse of even two days between each of these, it adds up to twenty days, or an entire month of business days! These delays can get very costly, as interest, taxes and all other expenses will continue to accrue.
It is very important to keep everyone needed down the line apprised of where the project is and when they will be needed. We strongly encourage you to get ahead of the ball by getting organized early with a business plan for your house flip.
Shortened timelines produced by hired help may increase your bottom line profit.
There is an expression that one should not be penny wise and dollar foolish. The meaning of this is that you may work very hard to save a penny, but cost yourself dollars in the end. Nowhere is this truer than in a residential property investment plan.
Unless you are a professional painter, you should hire a painter for your rehab project. It is guaranteed that they will get it done faster, cleaner and more completely than you will.
The painter is merely an example. The point is that someone who spends just about all day, every day, doing a certain task will have better skills and equipment than you will. They will also know the “tricks of the trade” to accomplish the desired end result in a much more efficient and professional manner.
With regards to licensed professionals, such as plumbers and electricians, only a fool would allow an unlicensed individual to work on these systems. When dealing with health and safety issues, it is imperative that you use someone with the special skills that a license connotes and insurance to support those skills.
Licensed tradesman are also required by most local jurisdictions for this type of work. Should you have an issue down the line with your property, and your work was done by someone unlicensed, you may have legal issues to deal with in the future.
If you are thinking about entering a partnership agreement, it is a great idea to find someone that is licensed in an area you are less comfortable in. Parternering with a specialist is a great way to ensure you get a good deal and high quality work.