With the market in the proverbial
port-a-potty there are many opportunities available for the savvy
investor. Flipping homes has
become a trend popularized by TLCA&EHGTV. It looks SO easy doesn’t it? Even Vanilla ICE is doing it! A little extra coin in the savings account, a story about
how you once helped your neighbor build a tree fort and you’re off. Let’s make some money!!
Whoa there big fella….
Ok, ok, I know you hung your new flatscreen and have every episode of
“Flip this House” Tivo’d, but there may be a chance – just a chance – that
you’re going to get in over your head.
Let’s get a plan in order first huh? How about a little due diligence? Fair enough?
Whether
a certified general contractor, Donald Trump, or a driving range pro, there are
variables that must be accounted for prior to putting pen to paper, or shall we
say putting your money where your mouth is. Without completing your due diligence you are simply putting
yourself in a compromised situation.
You may come out unscathed, but why start off in the wrong direction
when you don’t have to?
Your
first concern is a true and realistic budget. In these preparations I prefer to be overly conservative to
better protect my investors and myself. Your obvious first calculation needs to be your pre
determined total budget. Be fair
and be realistic. If you are lucky
enough to have access to unlimited funds, don’t take the approach that “funds
aren’t an issue”. Funds are ALWAYS
an issue, without a firm loyalty to the budget you set yourself up for nothing
but failure.
We
now need a “Flipping Itinerary”, and this is not the time to remember that
episode when the HGTV crew flipped a house in under 24 hours. Take into consideration actual sale
timelines in your area for comparable homes – then add 30%. Patience is a true virtue in this game,
and being prepared ahead of time only makes it easier. I’m sure you have the absolute best
intentions in hand and will renovate in the most attractive way possible. However, there are variables that can
and probably will arise that you can’t prepare for. The best way to prepare for the unknowns is to build in
additional time. Time is
money, so calculate all hold costs and be precise. Hold costs are a valuable piece of information as time
progresses.
It’s
renovation time! The hands are
dirty and the journey has begun.
We’ve stuck to our itinerary and our budget is in tact, this isn’t so
bad! While you sink into the rehab
be sure to always keep quality in check.
Just as you got this wonderful idea to flip, chances are high that your
buyers are watching the same program. Today’s buyer is incredibly savvy, researching on line
is second nature to most, if you try to “cheat” you will probably pay for it in
one way or the other. So make sure
your permitting is correct and deeds and liens are cleared. A great idea for a little extra money
is to have an inspection done on the home by and unknown source. These inspections are in the $300 range
and will save you a lot of headaches in future negotiations.
Flipping
can be fun and it can certainly be profitable. Just be sure to keep your ducks in a row and remember, in
the end, it’s business; and you need to be prudent.
