I am often asked by investors that look at the complications and all of the steps it takes to fix and flip a house; what I would consider the most important items one should take into considerations when rehabbing a property. I have boiled it down to just 5 critical items:
1. Money is made when you buy, not when you sell your flip. When flipping a house your money is made at the purchase, not at the sales of the house. Many times people buy a house with the intentions of making a huge profit only to find out that they could not make any money after all the renovations because the purchase price of the house was too high. When you purchase your property you need to be sure that you buy the house with enough money to make renovations, add in carrying costs, and add about $5- $6,000. Now, your cost is at $147,000, and that is if everything goes as planned. Your Profit is under 10,000 dollars!! The mistake was made at the purchase at the home, not the sell.
2. Get an inspection on the home – Get a complete inspection done on your property. By, spending a few hundred dollars on this, you can save thousands in problems that you cannot see. Foundation, Pest, Wood Rot, Etc… By, getting a full inspection you can rest assured that you know everything that is wrong with the property before it is too late. In the contract for the house, you need to make sure that you have 7 days to have an inspection performed, and if the inspection finds problems that are going to cost more money that you are willing to spend you can get out of the contract with no penalties or at least renegotiate the purchase price. By the way, don’t forget a sewer inspection. A blocked main sewer line can cost you thousands!
3. Don’t do the work yourself- Get a contractor or several sub-contractors and have the work done quickly. You need to have your house flipped ASAP so that you can get it on the market and get it sold. When I started flipping my partner and did a house together, and we did a lot of the work. I figured it would save thousands, but it took us over 4 months to get the work done that a contractor could have had the work done in a month. On my 2nd flip, I used contractors for almost everything and had the house completely flipped with a new roof, new air conditioning, new hardwood, and much more in only 3 weeks. I did not have to spend all of my time working on the property and was able to spend that time looking for the next deal. Leveraging your time is how you get rich in real estate.
4. Aggressively price the property: If you want to flip real estate and make money, the objective is to buy and sell the property as quickly as possible, so that you can move on to the next house. If you purchase a house and try to sell it at top dollar to make an extra couple of thousand dollars on your flip, sometimes you will end up holding it for a few extra months you are losing money. Get the house on the market at an aggressive price and you will sell it no matter what the market conditions. On my second house, the real estate market for selling house went down due to the housing market as a whole, and the tightening of the loans across America. I was were told that you could not sell a property in this market, but I went ahead anyway. After 3 weeks on the market, I had 3 solid offers to buy the house. Because I offered it at such a great deal, people wanted to jump on it. That is what you have to do f the market is slow.
5. Use a real estate agent – Do not try to sell your house on your own. Harness the power of a real estate agent and the power of the MLS system. When you do an FSBO you are depending on people driving by your house and seeing your sign. With a real estate agent, you have someone actively marketing your house to get it sold. This will free up more time for you to look for more great deals.
I hope this article has been helpful with the basics needs of flipping a house. If you will study and learn you will make money. But, do your homework before you purchase a house, and make sure that you can pull a profit on your deal. Then, make it happen!
Here is a short video on the topic:
Attorney William ("Bill") Bronchick, host of Legalwiz.com, has authored six best-selling books and is sought nationwide for his 25+ years of real estate and legal knowledge. He has been interviewed by numerous media outlets, such as CNBC, TIME Magazine, USA Today, Investor Business Daily, Forbes, and the LA Times, to name a few. William Bronchick is the co-founder and past President of the Colorado Association of Real Estate Investors and the Executive Director and founder of the College of American Real Estate Investors. Click on the "About" link above for more information on William Bronchick.