Fix and flips are not always as glamorous as what you see on TV, they are hard work and can be extremely stressful. Since most fix and flip investments are financed by a hard money lender, they are usually based on a twelve-month timeline. A year can go by rather quickly, especially when working on a big project. The stress of getting everything completed in a mere years’ time can really place some pressure on the investor. Don’t let this scare you! Whenever you are looking to start a new journey, there is always a little bit of fear and excitement. Don’t let the fear of getting started paralyze you from getting things done. Flipping houses can be a lucrative business if you follow the necessary steps to keep you from making a major financial mistake.
Selecting and managing a contractor
You want your finished product to be perfect. Sure, there might be a few minor things you can do yourself, but most big projects require the help of a licensed contractor. Do research on contractors to see who would fit your project best. Ask for pictures and references from contractors, even take a field trip to check out some of their previous jobs in person. Also, be sure to never pay your contractor too early; good contractors are very busy and usually have more than one project lined up. Make sure your work is completed properly before paying for the job in full. You don’t want the contractor to forget about you and move onto another project, in turn extending your timeline.
Give your property the “wow” factor
When creating the plans for your project, don’t over improve the property. You don’t want to blow your budget on unnecessary cosmetics, however, be sure to include at least one major upgrade. Buyers like to be “wow-ed” by a property; it’s what ropes them in. Including something like granite countertops, stainless steel appliances, hardwood floors, crown molding, or even outdoor landscaping could be the thing that sets your property apart from all the others.
Trust your local real estate professionals
Be careful when estimating the ARV. Although you’ve probably done a lot of research, and know everything there is to know about your specific property, you perhaps aren’t as seasoned as your local appraiser or realtor. A local real estate agent knows the area and comparable properties; through their experience they can determine an accurate listing price for your property. Use your realtor as a tool to ensure accuracy. You never want to lowball or overprice your property; an overpriced property can sit on the market for an extended period of time, minimizing your profit.
Manage soft costs
Set up a timeline and follow it. Purchasing a fix and flip home is a little different than purchasing a rental property. With a rental property, you are going to get paid monthly, but with a fix and flip, you only get paid once; when the property sells. For however long you may have this property in your possession, there will be monthly fees that can include anything from taxes to interest and insurance costs. The longer you hold the property, the longer you must pay. Every extra month is a month you didn’t budget for. Try to stay on track to keep your profit margins as high as possible. Save some room for error. No matter what project you are working on, there will almost always be some unforeseen issues. Make sure you have extra cash in your budget for any contingencies.
Flipping houses can be an enjoyable and lucrative experience, but it is also hard work. Do your research and plan accordingly with contractors and realtors. Use their expertise as a tool to expand your knowledge of the field. If you work hard and prepare yourself for the unexpected, you should be on the road to fix and flip success in no time!