The dream of the income property is still alive and well, whether it’s in the form of renovation and rental or picking up an out of shape house and flipping it for straight profit. Flipping a house isn’t quite as easy as the TV shows make it look, though, and if you’re looking to try your first flip, there are some things you should consider beforehand to make sure you get the most money after the fact.
This goes for time and money. You’ll start out with a calculated timeline and what seems like a reasonable budget. You might even build in a bit extra for delays in work or unforeseen expenses. No matter what your spreadsheet says now, assume that figure is a low-ball. Most flips run over budget and over schedule, simply because certain things won’t be known until you start the process. Bad plumbing and faulty wiring, for example, often aren’t seen until after the property is purchased and the demolition phase begins. Those kinds of problems end up costing thousands extra and days or weeks more than planned.
Take a look at your budget now. If you’re operating within narrow margins, the type where the property is only worth buying if you don’t spend any more than you currently have planned on the renovations, a flip isn’t for you. There’s a reason not everyone is out there doing this – properties that are affordable and require just the right amount of work to not eclipse resale value aren’t abundant, and competition is often fierce. Consider what you’re really getting, and what you can really afford. If you only have what you plan for, or if you can only take 3 weeks of work to make it happen, you’re budget isn’t reasonable for a flip.
First, realize something important – you can’t do it all. Certain things are going to be difficult for you to do on your own, such as installing large fixtures, while others might lead to illegal results if not undertaken by a professional, such as electric wiring. Figure out who’s going to be on your team before you ever have to start working with them.
If you have a partner in the process, all the better! Make sure you guys are on the same page when it comes to how labor, financing, and the end sale will work. The more you’re able to manage expectations, the better you’ll be able to get through any difficulties that may arise.
Talk to plumbers, electricians, and contractors beforehand, too. Even if you do the bulk of the work on your own, you’ll likely need each of those at least once. Take the time beforehand to set up a team that you know you can trust – read reviews, check licensing, talk cost and payment, make sure everything is in order. That way, you’ll be spared the stress of having to bring in a random company of unknown quality later on.
Function vs. Aesthetic
You want to make the house look good, that’s what going to sell it later on. But don’t ignore necessary upgrades that may not be seen in favor of purely aesthetic features. Cutting corners structurally to add more funds into the feature fireplace you’re planning isn’t just unethical, it could lead to lawsuits later down the road. Make sure everything is structurally sound first – have inspectors come out and let you know where the problem areas are. Worry about how good something looks after that.
On the same note, remember that just because something looks good doesn’t mean it’s functional. Adding pieces that have no functional purpose, such as unnecessary extra cabinets in a kitchen, might offer some visual appeal on paper, but they could end up clogging a space and actually driving the renovation value down. Look around the area – see what the top sellers are highlighting. If an open floorplan is what’s moving in the area, go for that even if it means modifying some of the original design. It’s more about what’s going to sell than what the flippers think will look good. Give your buyers the space that they’re going to want.
This flies under the radar with a lot of first time flippers. Even when you own a property, you aren’t able to do anything you want to it without some general reporting or oversight. Check with your city, county, and state to see what on your list of renovations will need a permit before you ever touch the house, and get those permits straightened out in advance.
Not having a permit or having improper permits could slow a project by weeks or even months. Front-load the hassle to make things easier as renovations get underway.
There’s no one right way to flip a house, and when it’s done right, working on your fist income property can be an exciting new business venture. Just make sure you have at least some of your flip beyond wall colors and room flow figured out early. That way, you’ll be ready to handle the rest as it comes.