We have all seen “Fixer Upper” or “Flip or Flop” but as an experienced remodeler, I am here to tell you that anyone can NOT flip a house and should not flip a house. Unless you have a true mentor with verified and proven experience to guide you through the process there are so many things that can go wrong and derail your dreams of becoming a real estate investor.
- You must have cash. I know you can use hard money or get a traditional mortgage to purchase the house but let’s be honest hard money is expensive and puts deadlines on you that may be out of your control. Which without experience you would not expect and a regular bank loan is going to have different but still challenging guidelines. They are going to have on-site inspections and contractor requirements that may not meet your budget constraints.
So, you need to have some cash. Things will come up and you don’t want to be stuck without the money to finish the project or have to cheap out on the final touches.
2. Vet your contractors. Make sure you have seen their work, checked their credentials and are named as an additional insured on their GL policy for the project they are overseeing for you. Get your scope of work in writing and make sure they are securing required permitting.
Many local areas no longer allow homeowners to act as the GC on an investment property. You must occupy the home for two years in order to qualify as your own GC. Make sure you check into this. I have seen it halt many projects and drain many bank accounts.
3. You can’t use cheap materials and cheap finishes but still expect to ask top dollar. Flips are put under a microscope by buyers because of the stigma they bring. House flippers are known as corner cutters and only concerned with their profits and not doing it correctly. Make sure you budget for quality materials or know where to source them.
4. Know your market. Who is the buyer for your finished product and what finishes can you put in your house that will make it stand out which will help ensure fewer days on market and higher profits? The cheapest square tiles from Home Depot aren’t going to cut it in many price points but may be fine for a starter home. I tour flipped properties all the time that have been on the market for months to make sure I don’t make the same mistake in my own projects and this is a big one. Putting granite in a house and new windows won’t sell it alone. You have to have some charm and character.
5. Partner with a great realtor who understands what sells and can work with you through the process. A great realtor partner will be a valuable resource but make sure you check their credentials as well. Real estate is a crowded field full of used car salesmen. Know the difference between a talker and a doer.
About the author: Tabitha and her husband Kris have flipped over 25 homes to date ranging from the lowest margin of 11% to the highest at 38%. Their homes typically sell for at or above list within days of listing. They have gained a following and pre-sell many homes due to demand for their brand. Check out Southern Pine Construction & Investments for project details.