If you’re like me, you’ve probably watched dozens of shows about house flipping and thought, “I could do that!” The truth is you probably can, but not without some proper guidance first.
A substantial number of things can go wrong. Here are a few truths every first-time house flipper should know.
Work with the Right Contractors
Having the right contractors to work with can make all the difference in the process. If you don’t have a solid relationship with quality workers, you’re going to find yourself experiencing more problems than you could have imagined.
Make sure when you get interested in a house that you try to consider all the areas that might need work. Study the roof, the siding of the house, and the electrical and plumbing systems.
Be thorough during the home inspection to ferret out any of the warning signs that you may need to replace your siding, for example. Such items will all add to your overall budget.
Renovate to Fit In with the Neighborhood Style
Different neighborhoods attract different kinds of buyers. What people look for in terms of style and functionality will vary, depending on where the house is located.
Los Angeles home buyers tend to seek modern aesthetics with open space and prominent use of the outdoor areas. Phoenix is probably going to insist on a pool to help withstand the heat as well as more Spanish style, one-story structures.
In order to succeed with your flip, you have to know your market.
Cheap Doesn’t Necessarily Deliver Quality
A lot of first-time house flippers will look for ways to cut costs. They’ll hire cheaper labor to renovate the kitchen or ask a family friend to do some of the work.
Going cheap means you’re less likely to get quality performance, however. You can find countless stories in which people decided to do the work themselves in order to save money, and ended up having to hire an outside company to fix the results of their labor.
Do yourself a favor and allocate sufficient money to cover the crucial aspects of the home you purchase.
Do the Math Ahead of Time
You make your money once you buy your investment property. That’s just a matter of math.
After the purchase is completed, your profit won’t be any higher than what it is at the point of sale. That’s why it’s critical to set your budget and do the math ahead of time.
Buy the house not because it “feels right” but rather the math works. It’s also smart to assume your initial math is wrong.
Go into your budget knowing that what you expect to pay for paint, labor, or bathroom backsplashes is going to be more costly than you anticipated. What you see online isn’t what’s real.
Call ahead of time. Start going to places like Home Depot and Lowes to see how much particular DIY jobs are going to cost you.
Then scale that price higher for contractors. Their time and labor will cost further money.
Don’t Overspend
So far we’ve been saying you should expect to pay more … and now we’re telling you not to overspend. Here’s why.
When we think about flipping a house, we tend to overspend where it’s not needed to make the house look “pretty.” Aesthetically pleasing appliances and tiles for the floor are all going to cost you substantially more. You have to be smart about where you spend the money.
Having a nicer-looking sink faucet isn’t going to change its job. Buy something more affordable that’s still an upgrade but won’t empty your account.
Concluding Thoughts
There’s nothing wrong about toying with the idea of investing in real estate. You just have to take the trouble to do your homework if you decide to move ahead with it.
Learn from the experts. Start talking to contractors. Work with your bank and real estate agent(s). Do the proper due diligence. You’ll be glad you did.