Now that we’ve talked about how to find a flip property and how to fund your flip project let’s discuss renovations.
I learned through many years of flipping homes how much I rely on a plan before renovating. I have also learned that there are unknowns, so having the details you have power over helps to make unexpected roadblocks and changes to the budget or schedule less daunting.
Most problems you may encounter will come during the renovation stage. Therefore, a plan is necessary. Your renovation plan must be solid, sticking to a budget and a schedule.
Remember: Your flip project is just that… Yours. Nobody else has as much invested financially, emotionally, and physically as you do. You can lose time and money without getting a handle on all aspects of your project.
Follow these five simple and proven steps to maximize your renovation.
Decide on Your Renovations
You’ve closed on a property and are officially off to the races. While you’ll want to have a general idea of renovations before putting in your offer you will definitely want to start as soon as you can after closing. Preferably, you’ll have been able to get all the details decided while waiting to close. If not, then as soon as you close you’ll want to finalize the details and have your scope of work ready.
Here’s a non-exhaustive list of some of the most common renovation choices that can increase return on investment:
- Adding lighting
- Baths (renovating existing and/or adding new)
Keep in mind not everything may need to be renovated. Updates may be enough. Think: Fresh paint, new appliances, and updated light fixtures. And lastly, don’t forget you’ll need to get confirmation of permits and who’s repsonsible for inspections and code compliance.
Set a Budget
Your budget will include materials and labor. You need to be strict with your renovation budget, mainly because unexpected and costly problems can pop up as it is.
You’re flipping for the best ROI to maximize potential profit, which means making smart decisions.
Your budget will start when you decide to put in an offer on the house. At that time, you’ll be considering house purchase costs, all upgrades and renovations, carrying costs of the property, selling costs, and some cushion to prepare for anything that can come up.
Each of the considerations for the budget has several sub-categories that make them up. For example, your house purchase price is more than your offer, and it’s loan origination fees, appraisal, inspections, title insurance, and more.
So when you’re setting your renovation budget before you get started, you want to make sure you have accounted for all other costs.
Field Bids from and Hire Contractors
For those who don’t have renovation experience, hiring a contractor is the best way to ensure that your renovations are completed according to the required building code.
Finding a contractor doesn’t have to be difficult, even if you’re brand new to the real estate industry. 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.
There are more ways than ever before to connect with contractors. You can see projects, reviews, and research companies on your phone. Websites like Angie’s List or Home Advisor can provide potential leads.
Always vet any contractor thoroughly. All contractors should be bidding on the same scope of work you provided to make all the bids comparable. Get multiple bids and compare them carefully. Beware of thinking that the cheapest bid will save you money; it could cost more money because of poor work or a lower initial bid designed to win the job.
Work with your contractor closely on schedule. An experienced contractor will be able to review the schedule and make suggestions. Be clear on who will be responsible for materials and other necessities. If you provide lighting and tile, you will need to know the dates those items are needed on the job site.
A timeline is just as important as a budget, and your contract should 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. For example, they might find additional repairs behind walls or items during construction that need to be addressed.
If you have setbacks and need to change your timeline, 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 walking away won’t yield any profit. If you ignore the problems, it may cost you a sale when a buyer’s inspection reveals the issue. The 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’ll confirm all the work was completed and that the house is ready to be shown to potential buyers. This is the time for paint touch-ups, caulking, and checking doors to ensure 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 it’s addressed.
For additional steps on hiring contractors and reviewing bids, this video has some more information.
Set a Schedule
Your schedule will look different for every project. It will depend on your chosen renovations, crews, and unexpected setbacks if applicable. As renovations get underway, it’s going to be exciting. There seems to be a
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 critical for you to continue to check in on the project especially if you’ve hired a contractor to oversee the project.
When you’re starting out and working with someone new you’re still managing the project. It’s up to you to ask questions and don’t be afraid to ask a lot of them.
Your schedule should be specific to each part of your flip project. Instead of saying your schedule is starting on X day and finishing on X day, allot a specific amount of time for each renovation need to keep expectations clear.
I also recommend you ask 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 is 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, which means making smart decisions.
Some flippers will make changes along the way, which is a big mistake that will cost you. Unexpected re-routes not only delay the project but can cost a premium. Do your best to cover all the work initially. If there’s something small you want to change, that may be doable but deciding to remove a wall after the drywallers have finished would be extremely difficult.
See it Through and Sell
Once you’ve secured your property, decided on renovations, hired a contractor/crew, set a budget and schedule, it’s time to move forward with wrapping up and preparing to go on the market.
This piece includes in-person and online viewing, including staging and professional photos. Staging can be done by you or a hired team. I recommend bringing in the professionals and learning from what they do, you might be able to pick up enough tips to do it yourself next time.
Photography is also crucial. Photos tell a story and help potential buyers imagine themselves in the home before stepping foot inside. Photographers will take the photos at the right angles, ensure adequate light, and overall look better than phone photos.
And finally, 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 on to another project.
Having a good realtor is key. They will help you with pricing recommendations and represent your interests when working with buyers. They’ll 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 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 can do. As you gain more experience, taking on larger projects may be on your horizon, and these will feel so much more possible with the experience you’ve built.
Ready to take that next step when it comes to flipping?
I have the perfect place to start! Check out my Find my Flip course.
I also have some resources I’ve put together 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 on finding houses, renovations, and funding on YouTube. Check out your favorite flipping topics and new videos weekly!
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