Over the past couple of weeks I’ve detailed the process on how to find a flip property and how to fund your flip. Now we are moving onto the process of the renovations, adding value to the property and the selling of your project once it’s finished.
For those who are considering fix and flip for the first time, there can be many unknowns when it comes to renovating. Even if you have renovated spaces in your own home, it is quite different when you are overseeing an entire house renovation. While this may seem like the “fun” part of flipping, as opposed to the other processes involved in house flipping, a plan is absolutely necessary. You may look forward to swinging that sledgehammer at demo time, selecting the can take part in demolition, choose new fixtures or appliances, and see the progress of the build firsthand. The reality of the process is that the renovation is where the majority of possible problems can come from. Possible…not certain. That’s why your renovation plan needs to be solid. Sticking with a budget and a schedule is your top priority. No one else will care as much about those two things as you do. Without those, you don’t have a guide to get the house back and the market and that means delaying the sale and profit.
No Experience Required
When I wanted to start house flipping I knew just enough about renovations to be dangerous. That translates to I had watched flipping shows on TV. I knew the basics but taking out a wall and structural support? Absolutely no knowledge. If this sounds like you, don’t worry. You don’t need to be. I promise. You just need to know how to hire the right people to get your renovation from start to finish.
How to prepare for starting your flip
These are the specific points we’ll be taking a closer look at here to make sure you get your flip started right. Additional details on each area throughout will help to guide you from the starting point to the sale of your flip.
- Renovate or update
- Hiring contractors
- Mind your schedule and your budget
- List and sell for profit
- Identify learning opportunities and repeat
Renovate or update
While some sources may say that house flipping is easy, I would add an asterisk of caution. If it was easy, everyone would be able to do it successfully and we know that is not quite how it goes. Each property is unique and values vary from neighborhood to neighborhood. Your primary goal is to think about how to maximize your ROI (Return on Investment) without doing too much or overspending. One of the biggest mistakes of both new and experienced house flippers is going over budget.
Before you start you need to decide which type of project your flip will be. Is it a renovation or an update? Ideally, this is something you would have decided when you were looking at the numbers for resale but some homes may offer the opportunity for both. Confirm your plan prior to starting to make sure your original plan still makes sense.
Keep in mind that a renovation is when you remove what is there and replace it with something new. For example, in a kitchen, that would include removing all old cabinets and fixtures and installing new cabinets, counter tops, fixtures and appliances. It may also include removing walls to create an “open concept” floor plan.
For an update, you would keep much of what is existing in the home. These projects would consist of a lot of paint and flooring for the changes. Replacing high use items like sinks, counter tops, appliances and light fixtures will also add value. The overall layout and spaces will stay the same. overall you’re leaving the area like you originally found it.
Choosing between a renovation or update is a budget choice. If the existing cabinets and fixtures are in good condition, it’s less expensive to keep them, clean them up and paint. This will help maximize your profit. If you have the budget or the area supports a renovation, then it will help increase the value of the house. Either option may work and you can incorporate ways to sell for more with both
Tip: Even if you think you want to keep the cabinets, always compare the price of cleaning, repairing and painting to replacing. You may be surprised that the time and labor for the painting is comparable to the cost of replacing. And replacing them will potentially take less time.
Consider improvements that have the best ROI. In older properties, renovate the kitchen because the area won’t have the layout that modern homes have. The next place to look is the bathroom. Changes to these two areas will add significant value. Remember, not every room needs to have a major overhaul.
A flip isn’t necessarily about tearing everything out. Sometimes adding fresh paint, changing out the flooring and swapping out light fixtures can add enough value while creating an opportunity for profit too.
For those who do not have renovation experience, hiring a contractor is the best way to ensure that your renovations are completed according to required building code. Finding a contractor doesn’t have to be difficult. I suggest always starting with referrals from friends and family. Who do they know? Who have they hired and had a good experience with? Real testimonials or knowledge of someone who is a contractor is the easiest place to start.
When it comes to online, there are more ways than ever before to connect with contractors. You can see projects, read reviews and research companies. Sites like Angie’s List or Home Advisor can provide potential leads. Always vet any contractor thoroughly. Get multiple bids and compare them carefully. All contractors should be bidding on the same scope of work you provided so that all the bids are comparable. And beware of thinking that the cheapest bid will end up saving you money; it could actually cost more money because of poor work or a lower initial bid that was designed to win the job. These bids often increase as the project goes forward leaving you with a higher cost than planned.
You’re going to have to plan out the schedule to complete the entire renovation and work with your contractor on the details. An experienced contractor will be able to review the schedule and make suggestions. Make sure that you are also clear on who will be responsible for materials. If you are going to provide lighting and tile then you will need to know the dates those items are needed on the job-site.
As important as the budget is the timeline. As part of the contract you will want to include both a start date and a completion date. Ideally your contractor will be able to complete renovations on schedule, but they could encounter situations that cause delays or setbacks. They might find additional repairs needed behind walls or items during construction that need to be addressed. If this happens to you, don’t worry. Stay calm and figure out the proper solution with your contractor. It may increase costs but the alternatives will cost much more. Trying to sell a house where you started and then walked away isn’t going to yield any profit. If you ignore the problems, it may cost you a sale when a buyer’s inspection reveals the issue. Bottom line, take care of it. It’s worth it.
At the end of construction make sure you complete a walk through. This should be done before the final payment is made. You will confirm all the work was completed and the house is ready to be shown to potential buyers. This is the time for paint touch ups, caulking, and checking doors to make sure they open and close properly. Look at the house as though you were a buyer and if it looks like something that needs attention, make sure its addressed.
For additional steps on hiring contractors and reviewing bids this video has some more information.
Keep a schedule, stick to your budget
As renovations get underway it’s going to be exciting. There seems to be a lot happening in the beginning and then all of the sudden, things will slow down a bit, or a lot. Don’t worry, that is the nature of construction. This is where it’s key for you to continue to check in on the project. Especially if you’ve hired a contractor to oversee the project. When you are starting out and working with someone new you are still managing the project. It is up to you to ask questions and don’t be afraid to ask a lot of them. Another recommendation would be for the contractor to let you know when inspections are scheduled. That way you can add that to the job schedule and know how things are moving along. Delays are part of the process and are often out of your control, but being aware of when and why are essential.
Along with your schedule, you will have a budget for every job. This includes materials and labor. You must be strict with your budget. To maximize potential profit, you’re flipping for the best ROI, and that means making smart decisions.
Making changes along the way is another big mistake that I often see people make. These unexpected re-routes not only delay the project but can cost a premium. Do your best to cover all the work initially. If there is something small you really want to change that may be doable but deciding to remove a wall after the drywallers have finished would be extremely difficult.
Sell for a profit
Once the renovation is complete you are ready to sell the house. Your goal here is to sell the property quickly so you can move onto another project. This is where having a good realtor is key. They will help you with pricing recommendations and represent your interests when working with buyers. They will negotiate on your behalf when it comes to pricing, concessions and inspection requests.
Though you will pay a commission, they bring expertise to the process and can potentially secure you a higher price and more favorable offers.
If at this point you are considering your next project, congratulations. You’ve just learned something new about yourself and what you are capable of. As you continue to gain more experience, taking on larger projects may be on your horizon. These will feel so much more possible with the experience you’ve built.
Lessons learned and repeat
Along the way, there’s a chance you’ll make a mistake. It is, after all, your first fix and flip. Don’t get discouraged because you will learn that all problems have a solution. When something is new, it just may take a bit more to figure out what that solution may be. Learning by doing is always the best educator.
Fix and flip isn’t for everyone, but anyone willing to take on the challenge will learn how to be successful.
This series of tips is the beginning of your fix and flip journey. With every single project you will find your knowledge and skill growing. Soon, you may be looking to pivot to larger projects or different neighborhoods. These choices are yours to make so get ready to take control of your flipping future.
Ready to take that next step when it comes to flipping?
Now that you know how to fund a flip, here are some 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. Let me know what your biggest challenge is with getting started house flipping. I’m here to help.
Want to buy a property and renovate it?
I have a freebie checklist that will help you — 8 Things I look for When Purchasing a Home. Just click here to download it.
Love before and afters?
Follow us on IG @thresholdhomesmn and FB @thresholdhomesmn to see the projects we’re working on. And for more ideas on renovating & restoring fixer-uppers!
Looking to buy a house to renovate? Check out the fixer upper checklist to help you find the house with the most “flip” potential.
For more inspiration follow me on Pinterest @thresholdhomesmn
Leave a Reply