As it becomes more and more difficult (due to a dearth of both available and low-priced and/or distressed properties) to make a profit flipping houses, Barb Nefer with msn.com asked many professional flippers for their wisdom and advice to help other less experienced and wanna-be home flippers make money.
Successful home flippers agree that investors ought to do their very best to…
- Pick areas with rising home values rather than areas that have already reached their price potential.
- Buy at a steep discount…if at all possible.
- Renovate to today’s tastes rather than your own tastes.
Specifically, pay attention to these Flipping Rules
- Spend no more that 70% of the home’s value when repairing/renovating. Matt Woodley, founder of Mover Focus, said, “The 70% rule states that after all the costs of purchasing and fixing the home are calculated-including closing costs, replacing items with the house, the cost of the house itself and the labor needed for any repair – you should not spend more than 70% of the anticipated value of the house.”
- Get a professional inspection on the house BEFORE buying. Ideally, successful home flippers flip houses that need only cosmetic repairs. Why? According to Sacha Ferrandi, founder and principal of Texas Hard Money and Source Capital Funding, “Foundation issues, structural damage and electrical issues equal big bucks. Make it a rule that should never be broken…get a professional inspection before buying.”
- Stay neutral about the house – do NOT fall in love. Ferrandi said, “Take yourself out of the equation. You’re renovating this home to appeal to the general market, not you…break this rule and you decrease your chances of selling fast.”
- Bells and whistles can kill your budget. Craig Russell, CEO of the English Contractor and Remodeling Service, said, “Skip the appliances, wood flooring and special details that cost money…be certain the roof and foundation are sound.”
- Keep a detailed record of ALL flip-related costs. Attention to detail will keep you on budget and save you from the last minute scrambling around for necessary paperwork at tax time.
- Concentrate on the big details, not small, microscopic ones. Fresh (preferably white) paint and flooring impact buyers; toilet paper dispensers do not.
- Work in unison with the market. Agent Jennifer Okhourt said, “Base all (price) projections on the current market and properties selling near the subject’s property.” Use current comps, not crystal-balling future comps.
- Forget about finding a home to flip on Zillow or Redfin or some other website. According to Logan Allen, CPA and owner of the personal financial site Money Done Right, “…great flips aren’t going to just magically appear…you’re going to have to invest time and money to find a flip-worthy property.”
- Numbers Rule – “Know your After Repaired Value,” said Nick Disney of Sell My San Antonio Home.
- Location, location, location. “An undesirable location is the one thing you can’t repair,” said Robert Taylor of The Real Estate Solution Guy. Also look for flips having reasonably near-by public transportation.
- Have a contingency fund of at least 5-10% for all those “just-in-case” things that happen such as pipes bursting or appliances being stolen. The age-old rule of planning for the best and preparing for the worst definitely applies to house flipping.
- Best to be neutral and leave the personal touches to the buyer so they can make the house theirs, advised Brad Pauly of Pauly Presley Realty.
- Curb appeal matters. Trim overgrown trees and bushes, reshod the lawn, add a splash of color with flowers.
- Remember…house flipping is a business. Make your decisions based upon expertise. If you don’t have that expertise, get it from a professional. Keep the project marketable in terms of code requirements, functionality and design. Qualify your (sub) contractors, get accurate/multiple bids, and aim for consistent pricing from project to project.
- Be shy of one-bathroom houses…they are hard to sell.
- Bottom line…house flipping is about buying, fixing and selling. The longer the fixing and selling take, the more money you’re spending out of what could have been your profits.