Fixer Upper. Flip or Flop. Love It or List It. Property Brothers. Television today is inundated with shows where a property company comes in, buys houses in disrepair, restores them to better than new, and then provide them to new homeowners who (hopefully) fall in love with the re-creations.
So, what exactly does it take to flip a house? What steps can you take to make sure that you don’t sink head first into an unforeseen money pit? How can you successfully tread the tightrope between prosperity and possible bankruptcy?
The first and most important step is to have a plan. I’m not talking about a vague idea that you might have gotten while watching HGTV. It needs to be both iron clad with enough wiggle room to factor in things that you would never expect to happen. Having a vision of the perfect house is one thing and the possible chaotic and even catastrophic events that may occur between outset and conclusion is something else entirely.
So, how do you go about developing a plan? Research, of course, is essential, but where would you even begin to look for information on flipping houses? Thankfully the Internet multiple pages dedicated to the subject – but, as with any other topic, be wary of the source. There are thousands of scam sites out there waiting for someone to fall into their trap and steal their savings. An example of a reliable source would be: http://www.investopedia.com/articles/mortgages-real-estate/08/house-flip.asp?lgl=myfinance-layout-no-ads The same goes to books that you would find at the library or magazine articles. It’s always a safe bet to try and verify information from three separate sources to ensure that it’s accurate and up to date. Remember, you’re going to be investing a large chunk of both your time and finances into this project. The more prep work you do in the beginning, the less headache you will have later on.
Once you have a plan, the second most important step is to budget. Yes, I’m referring to a financial budget, but also a time budget. How much work do you want done on the property you’re about to renovate? Are you starting from scratch or are you just doing some updating and cosmetic improvements? How much work needs to be done to make it not only up to code, but also livable? Have you budgeted for unforeseen problems that are most likely going to pop during the project? What about after the fact, when all the work has been done and the house is on the market – how much time are you planning on letting it sit there waiting to be sold?
Third is having a lay of the land. Meaning, how well do you know the area around the property that you will be working with. Was it once a prosperous neighborhood, but it’s been showing signs of becoming rougher? On the flip-side, is it a neighborhood that has the potential to surge in both popularity and value within the next five years? Will the crime rate and surrounding school districts impact on the value of the home in a positive or negative way? Having an estimator is a solid tool to have in your arena. Sites such a http://www.zillow.com with the fantastic Zestimator (which, if you haven’t used it, goes into everything from how many beds/baths it has and when it was built, to how much activity it’s had on Zillow, to the value and tax history of the property), http://www.redfin.com which gives you a snapshot of the value of the house and the last time it was sold (and for how much), http://www.homesnap.com which is very mobile friendly with its app, and https://www.neighborhoodscout.com/ which, at a glance, tells you property values, demographics, crime statistics, schools, and trends and forecasts. All of these are going to make you’re life significantly easier in the planning stages.
The fourth most important necessity would be a team of professionals to help you with everything from the demolition and reconstruction of the house; as well as the surrounding landscape and property. Again, research is vital in this process. It never hurts to check the BBB and other resources before agreeing to go into a project of this magnitude. Ask yourself if you would trust them to work on your house; and if there is any doubt, then continue the search for someone else. An amazing team will shave days, possibly weeks, off the projected timeline; and save you thousands of dollars. A bad team will decimate your project and deplete your funds.
The fifth and most vital tool is having ample patience. I cannot stress this enough. Trying to rush a project and/or cut corners is the fastest way to ensure disaster and self-sabotage. Without ample time, money, and patience, you will fail.
Heart & Soul Property Solutions 