23 Feb Flipping a Home? 5 Secrets of the Professionals
Flipping a Home? 5 Secrets of the Professionals
Ask anyone who’s tried their hand at it, or even watch a TV show or two, and you’ll realize that flipping a house can be risky. The concept is to buy a home on the cheap, fix it up, and sell it at a tidy profit. Of course, a lot of things can go wrong and eat into that profit.
Common mistakes made by beginning house flippers include buying the wrong property to start with, budgeting renovations incorrectly, over-spending on remodeling, and spending on the wrong things.
Most flippers who do it for a living aim for at least a 20-percent return on investment, and accomplishing that means avoiding mistakes. If you’re flipping a home, here are five secrets of the professionals.
1. Worst house, best neighborhood
A successful flip starts with buying the right property, and a good rule of thumb is to acquire the worst house in the best neighborhood.
Location has huge impact on the market value of a home at the time you purchase and at the time you sell. An underpriced house that’s in a very desirable area is likely underpriced because of its condition, which is what you’re looking to rectify. Look at comparable homes in the area to determine what the ultimate value of the prospective home will be once work is completed. Usually incorporating a Realtor is a smart decision. A real estate agent will know more about the market, including trends and what buyers are looking for. A buyer of a home in Bemus Point, NY may be looking for amenities associated with Chautauqua Lake and home buyers in Lakewood, NY (a few miles away) may be looking for neighborhood amenities such as shopping.
2. Know your limits
Every professional flipper has a list of tradespeople to rely on when things get beyond their own expertise. Most handyman types can do a lot of remodeling work themselves, and even beginners can paint, install vinyl plank flooring, change light fixtures, or even replace toilets.
But for more complex jobs or even just assessments outside their expertise, even the pros turn to other pros. Licensed electricians and plumbers, as well as structural engineers or architects, are paid well because they are very good at what they do. When you can’t do part of a job as well as someone else, paying them to do it is money well spent.
3. Don’t over-improve the house
A common mistake among house flippers is trying to have the nicest home in the neighborhood. They put in high-end materials and fixtures hoping to achieve a “wow” factor, but if other homes in the area don’t have the same level of finishes, you’re wasting your money. It makes no sense to have a $250,000 home on a street of $200,000 homes.
Instead, stick to mid-range remodeling and splurge on one feature if you want to go for the wow factor – a kitchen countertop range with a hood, floor-to-ceiling built-ins in one room, or marble tile in a master bath. You can give the impression of luxury without spending big money in every room. A good goal is to be able to leave some home value on the table. In other words, be able to price your renovated home under the market a bit so people are surprised at what you are giving them for the money.
4. Repurpose everything possible
When a house is in bad condition, your first impulse might be to gut it – bring in a dumpster and tear everything down to the studs. But you might not have to.
Professional flippers repurpose what they can to save money where they can. Outdated bathroom tile might make for a cool retro kitchen backsplash. Older kitchen cabinets might be painted and used as extra storage in a laundry room or kids’ playroom. Old hardwood flooring can be freshened up and used in a variety of ways.
5. Don’t forget the exterior and landscaping
One of the most critical aspects of flipping a home is selling it quickly once work is complete, and if you want to sell a home quickly, it must have curb appeal.
It’s imperative, then, to leave some room in the budget for exterior improvements for at least a good pressure-washing and maybe painting or spruced-up landscaping. Don’t underestimate the importance of work on the outside of the home. You will want to declutter the gardens and trim shrubbery. Instead of buying new plants, you could move some of the old ones. Also, you could look around your own house or ask friends if they have anything that you could transplant. In the past, I have looked for native trees growing in the woods near my house and have used those.
The bottom line
There are people who make a living by flipping houses profitably. A few tricks from the pro’s and a solid plan to keep you on track will greatly increase your chances of being profitable.
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