We’ve all seen those TV shows where people buy an old, run-down house and transform it into a beautiful property. Maybe you even personally know someone who’s dabbled in flipping houses. But if you’ve got your eye on some shabby real estate, know that it’s not as simple as slapping on a few coats of paint. Here are a few things you need to know before your first flip!
1. Don’t buy a house just because it’s cheap. Sure, the goal is to buy low and sell high, but make sure to analyze the other factors that could damage its profitability. Maybe there are too many problems and you’ll have to dump thousands of dollars into it just to make it livable. Maybe it’s in a high-crime neighborhood. Consider whether you’ll really be able to make a good return on this investment.
2. Plan ahead. A lot of flippers don’t bother to make a game plan until the house deed is in their hands. However, there’s plenty you can do before closing to save yourself some time: figure out what changes you want to make, research contractors, make a list of tools and materials, etc. (Just don’t actually spend any money until the house is officially yours.)
3. Don’t cut corners on the “scope of work.” The SOW is a document detailing exactly what changes need to be made. This is your master plan. It may be tempting to say “We’ll just start working and fix problems as they come”–but this can lead to sloppy execution, time delays, and problems that slip through the cracks. With a full, specific SOW, you’ll be able to keep everything on track and efficiently done from the get-go.
4. Choose your contractors wisely. Read reviews, talk to past clients, verify their certifications. And remember that like with point #1, cheap isn’t always good. If you hire the lowest-bidding contractors, you’ll probably get work to match.
Ultimately, if you want to be a successful house flipper, you should be prepared to make some significant initial investments, whether it’s buying a property that’s more expensive upfront (but needs fewer fixes), or hiring the $50/hr guy instead of the $30/hr guy. If you’d like to explore options for financing your upcoming real estate project, call Liberty Commercial Capital at 317-569-1110.