What You Need to Know About FLIPPING a House
So you want to renovate to make money?
Making money flipping homes is not always as simple as HGTV makes it out to be. If you plan to renovate to make a profit, ensure that you set a budget and STICK TO IT. And while we don’t want to deter you from chasing your house flipping dreams, keep in mind that most flips make about half of what they are expected to.
Here is what you need to know if you want to flip a house without losing your investment:
1. Choose your community wisely. Not all communities offer a return on investment for renovations. Look for an area where there is a wide spread between the cheapest and the most expensive home offering similar size, features, finishes etc. Look for sought after communities that have a low supply of renovated homes and a high demand from buyers.
2. Avoid busy roads at all costs. Don’t be tempted by the low price of the acquisition! Location will play a part in your asking price when it comes time to list the finished project. While close proximity to shops and amenities will be factored into future value, if you got a “deal" due to location when you bought the fixer upper, remember that that a poor location will not change and will always be an issue for resale.
3. Avoid homes without easy to access backyards. Corner lots or side entry homes are often less desirable for buyers. Be sure to choose a lot that is going to be marketable to future buyers - having access to backyard space from a social area (not a bedroom) is often on a buyer’s list of must haves.
4. Don’t spend too much money on the renovations. A new roof, sure. A new 50yr guarantee concrete roof - not worth the money. Do what you need to do to make the home structurally sound, dry and safe, but there is no need to go overboard if you are simply looking for a profitable return.
5. Don’t spend too little on renovations. While you don’t need to buy top of the line everything, buyers are leery of quick flips. Make it a top priority to address all major issues, and be sure that all work you do looks GOOD and is COMPLETE.
6. Hire experienced trades people. If you aren’t capable of doing the work yourself, hiring skilled professionals to do your work is crucial. While it may cost more initially to hire an experienced trades person, you do not risk losing your investment due to sloppy work - The walls must be square, the tiles must line up, and the cabinets must open without hitting the light fixtures.
7. Plan your work. Time is your enemy for profit. Make sure you can complete your reno inside of 8 weeks to avoid costly carrying expenses. Remember, the home may still need 3-4 months on market to sell and close depending on your price and the marketplace when you list and if it takes you double the time to complete your work, your expenses will go way up.