You’re relatively design-savvy, know a thing or two about home structure and even survived a major kitchen renovation by washing dishes in the bathtub for weeks. Binge-watching “Flip or Flop Atlanta” is your new guilty pleasure. You view the final bottom lines and wonder: “Could flipping work for me?”
Flipping a house or condo simply means you are purchasing to renovate and resell. This is both a real estate and sweat equity investment. You won’t discover a singular magic formula for maximum gain, but there are basic tried-and-true rules which, when followed during the house-flipping process, are most likely to keep you afloat.
The less you pay out at the get-go, the more funds you will have for restoration. Banks don’t like holding on to financially failing homes, so plan on extending low bids whenever possible. Banks do, however, like cash. If you can put cash upfront just to get the project moving, loan options may be available down the road to help cover renovation costs and closing fees.
How much cash should you free up? Start by assessing your maximum purchase allowance based on the investment property you are researching. What is the current market value? Knock that amount down by 70 percent, and then add expected costs for remodeling, permit acquisition and inspections. Your result is a fair ballpark figure of the overall project expense.
Next, research loan options. Banks and traditional lenders require a decent credit score and thorough property assessment at the very least. The process can be long and multitiered. Hard money lenders, on the other hand, structure requirements around asset value and are more tolerant of fixer-upper investments. Federal Housing Administration — FDA — loans typically only ask for 3.5 percent cash down.
Don’t worry — you don’t have to be an expert in financial planning and real estate investments, but you do need expert advice. Consider hooking up with a reputable accountant or loan officer for help with navigating the process. You’ll learn the most up-to-date tactics in a realm of ever-changing information.
Key elements to aspire to are quick resale and desirable location. Check average square-foot price structure in the area and compare it to your approximate total budget. If it looks like you realistically can purchase, remodel and subsequently post a competing list price, you’re in good shape.
Location factors are not difficult to discern. Remember, you want to invest in an area that is currently sought-after, not one that promises up-and-coming desirability. Is the property located within a well-rated school system? Is it close to major hubs of transportation? What is the average home turnover rate? Are there any pervasive social or environmental neighborhood concerns?
Again, consider enlisting the help of a well-respected real estate agent. You may even receive advance notice of appealing investment opportunities.
In keeping with the ultimate goal of a quick, lucrative resale, you’ll want to glean as much information as possible regarding the soundness of your investment’s structure. In other words, if you can avoid unexpected highly involved structural tasks such as replacing a roof, switching out electrical wiring or rerouting plumbing lines, you’re ahead of the game.
Along with structural damage, hazardous material removal is another heavy-hitting pitfall. Thoroughly check for mold and water damage. Ask about insulation and paint materials. You don’t have to be a contracting sleuth — you can learn all about the history of any home, including past additions and renovations, online.
Cosmetic improvements give you more bang for your buck. Therefore, consider overall fresh coats of neutral paint color, a windows that bring in natural light, classic tile installation for the kitchen and baths, and switching to LED lights. It’s even better if you can do some of these improvement yourself with the help of friends. Nothing wrong with throwing a modern day Huckleberry Finn event!
Of course, you wouldn’t be considering house flipping at all if you were a master architect or interior designer. Get a team of experts in your corner. You may know some from previous successful projects, so once you initially start compiling a crew, the rest pretty much falls into place.
Of significant note is coordination with your local building inspector and land use office. In the planning stage of remodeling, be sure to check for code compliance. If your property has undergone previous renovations, confirm that the ensuing certificates of occupancy — COs — were signed off on.
Afraid of tackling more than you can handle? Emulate those who, time and time again, crush extensive flipping ventures.
You wouldn’t know it to watch their youthful, lively antics, but the twin brother team of Jonathan and Drew Scott have revolutionized house flipping into a veritable art form over the last 20 years. Jonathan contracts and designs creatively and with innovation, and his brother Drew represents real estate clients with spot-on market savvy. Together, they bring vital knowledge and wit to exciting and lucrative projects.
More recent on the house flipping scene is mother-daughter duo of Karen E. Laine and Mina Starsiak Hawk. Signed on by HGTV two seasons ago, this attorney/contracting team remodels with heart. In an effort to rebuild their home community of Indianapolis, Laine and Mina distinctly take on projects that breathe new life into old, classic neighborhood structures.
Ironically, perhaps the best advice to novice house flippers comes from a classic carpentry proverb: Measure seven times, cut once. After all, there’s nothing like great care taken during the many of stages of preparation to assure a stable flip landing.