In thinking about the post for this week I thought about some of the conversations that I’ve had lately with people who have experienced renovations. For those who have lived through the process the majority of people fall into one of two camps. One the one hand they enjoyed going through it and would consider doing it again. On the other hand are the people who either never got started on their improvements before deciding it was too much. There’s also a third group of people who fall into the “never ever again” category.
So what are the tripping points where people can get caught in a situation that is tough to recover from? Let’s take a look at a few areas where knowing what to look for can keep you from making a big mistake.
Falling in Love with the House
You find a house and schedule a showing with an agent. As you’re walking through you see that this place is a complete mess. Discolored carpet that has seen it’s share of traffic, original kitchen from the 1950’s (or earlier), windows that are cracked with peeling paint, a roof with shingles that are stained and curling (you get the idea). You think that this is the perfect house to flip. You know you can definitely make it look better and you know exactly what to do. You’ve found the perfect fixer.
But remember, the more run down and worn a home is the more money will be needed to bring it back to life. More money and with larger projects, it’s also more time.
This is not to discourage you from buying the worst house on the block but it’s worth mentioning that no matter what the condition of the property you need to run the numbers. Not every house that needs work is one that will make money. It’s okay to be a bit picky about the house you decide to purchase. Tip: Don’t fall in love until after you know if the numbers make sense
Pick the Right Location
Just as every unattractive house isn’t always a good flip the same is true of a home in the wrong location. Neighborhoods have specific parameters that can make (or break) a flip project.
Think high traffic areas or areas where there’s a lot of commercial buildings (businesses and apartments). Those may not be areas where buyers would consider paying the same amount. You need to first and foremost buy in locations where appreciation is possible. Without this factor the project will not make sense.
Pay Too Much For Your Perfect Fixer Upper
Let’s agree, buying a property is not the same as buying many other items at a variety of price points. Believe it or not, people spend more time researching the latest flat screen TV and its price than a property worth hundreds of thousands of dollars. It’s lunacy at its best and the only logical reason that I can concoct up in my head as to why people do this, is because perhaps, people don’t actually know how to determine the true value of a property, before they buy. Let’s face it … they don’t teach this sort of stuff in school so unless you are self-taught , you could get this part of your renovation, horribly wrong.
There are several ways you can determine what a property is truly worth before you submit your offer. There’s a plethora of property reports around like Core Logic RP data that will help you inch one step closer to paying the right price. Local recent comparable sales are another way. Micro analysis at a street price level will also help you get your price spot on. In every suburb, there’s a good & bad side to the suburb and property prices will differ all within a suburb to reflect that. There’s also the option of an independent valuation and a stack of other ways to ensure you get your buy price right.
Many property experts say “you make your money when you buy” and whilst I don’t necessarily agree with this catchphrase, what I do know is, if you overpay for a property when you buy, it doesn’t matter what award winning renovation you do, it will be extremely hard to recoup a profit. Tip: Never trust a real estate agent’s opinion on what a property is worth, spend proper time doing your own independent research to make sure you don’t overpay, when you buy.
Over Improving Your Renovation
It is very easy for people to fall into this renovation trap. Even the most skilled can catch themselves wanting to create an amazing renovation with stunning finishes like they see on TV. But just because that is what is on a home improvement show doesn’t mean that is what you should be doing in real life.
While design is important it is not everything. There are homes that will not have the same value even if they have the best appliance package installed. If you are renovating a standard home you don’t need an extraordinary budget. You just need to fix the items that need to be replaced or repaired and make the home better than it was before.
The design and renovation needs to be in line with the neighborhood always. If its not, then you created a home that is top notch but that produced no profit.
Find the Right Contractor
Go to a dinner party and many tales will be told about those contractors who made a promise that somehow fell flat. For new renovators, the unknown of dealing with contractors and what you’re going to get, is a rather frightening concept. Like any occupation, you get good & bad so just accept that from the get-go. You’ll quickly learn who the good ones are, so they can continue to work with you on future projects. Tip: Engage in honest conversation with your contractors. Ask for their help, document the project details before they start the job, get pricing lined up and pay them on time when the work is completed.
I’m Ready to Flip, What’s Next?
Ready to take that next step when it comes to flipping?
That’s why I’ve got additional resources to help you get the information you need to move forward on creating your flipping life.
Make sure you have the Fixer Upper Checklist so you know which areas are key to added value in a home.
There are several videos available on finding houses, renovations, and funding on the Threshold Homes YouTube Channel. Check out your favorite flipping topics and new videos weekly.
You can’t close a successful and profitable flip unless you start. What is your biggest challenge with getting started house flipping? Let me know. It may be an area I’ve also had questions about myself. I’m here to help so drop me a DM.
Want to buy a property and renovate it?
Get my checklist that will help you — 8 Things I look for When Purchasing a Home. Just click here to download it.
Love before and afters?
Looking to buy a house to renovate? Check out the fixer upper checklist to help you find the house with the most “flip” potential.
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