Flipping houses is a business full of decisions. Each choice you make has the potential to impact your timeline and profit. A wrong choice can cut into your final profit and throw off your schedule completely.
We’re not only talking about the big choices here. There are dozens of small decisions you’re making that individually or collectively can hinder the success of your flip. I found that focusing on mindset, being realistic, and following these 13 steps will help you avoid costly repercussions.
Through personal experience and growth in my flipping business, I avoid delays and increase the number of projects we can work on. Regardless of where you are in your house flipping business (newbie or seasoned flipper), I urge you to read through these steps and tips, as there are plenty of ways you can add or modify your own business and projects to avoid wasting money.
Step 1: Building Permits
The first step I want to cover is getting your permits. Forgetting about building permits or thinking it’s unnecessary is understandable. A little unlicensed construction might not seem like a big deal, but permit problems can lead to lawsuits if potential buyers (or their potential lenders) discover defects late in the sale process.
If you’re working on your home’s structure, plumbing, gas, or electrical systems, you’re probably going to need the city’s stamp of approval. Consider this mindset shift: Instead of worrying about saving time and stress getting permits, think of the time and stress you’re saving and know you’ll avoid it by securing the proper permits.
Step 2: Speak with a Local Real Estate Expert
The internet is an excellent source of market information, but it shouldn’t be your only source. Local real estate experts are well-versed in the area and can help you during much of the process of your flip.
To start, a real estate agent can help you understand the local market and what buyers are looking for; they can also help you find your flip, and they’re an asset in puzzling out the house’s ARV (After-Repair-Value).
I consider this an essential step because doing it all on your own and missing properties with better potential, moving forward without vital information they can provide, and coming up with an inaccurate ARV are costly mistakes.
Step 3: Limit Fancy Finishes
My next step to avoiding extra costs is limiting fancy finishes. High-end flips come with high stakes: If buyers don’t love your big-ticket design decisions as much as you do, they may balk at the big ticket altogether.
Instead, be mindful of your choices when it comes to design. Use the wealth of information around you to make design decisions. I recommend looking at comparable homes, keeping up with trending designs and what buyers are looking for, and always checking off the “basics” and must-haves for buyers.
Step 4: Make the Easy Fixes
My next step is to never overlook the easy fixes.
Sure, a gut renovation that gives an old home an open floor plan delivers more “wow” than swapping out beat-up old doorknobs and light switches- but keep in mind, buyers are smart. Buyers will notice these “small” things too, and they’re easy on the budget!
Step 5: The Do-or-Die Flip
If the real estate market in your region takes a sudden turn and you find the need to change your strategy- say by offering your project as a rental property until prices recover- you’ll need to be prepared to hold tight until its eventual sale.
Flips might feel like sprints but can be marathons. This is another step that requires the mindset of a business owner and planning.
Step 6: Stage with A Pro
Our next step is staging with a pro, from the get-go. Hiring a home stager to prep your first flip for open houses is a spend that will serve you well in the long run.
My advice here is to be OK with getting help and recognizing where you can use expertise. Staging will make a huge difference in the way your home is perceived, and the ease of sale. Not to mention, you can gain a lot of knowledge by working with a stager.
While working with a stager, pay close attention to what they do, and ask questions! Each home has different features, and stagers know how to highlight these and create the perfect flow so buyers are brought through the home naturally and can easily picture themselves living there.
You may choose to take these tips and run for your next project or continue to work with a stager; that’s up to you.
Step 7: Realistic Timeline
The next step is creating and maintaining a realistic timeline. This starts at the beginning of the project, but should be checked in throughout your project and tweaked as needed.
Timeline is critical, and it’s helpful to get feedback from everyone involved in your flip, and ensure it works for all on the team (namely contractors).
When you’re setting your timeline, be realistic. Getting it done quick and easy is ideal, but isn’t always realistic.
What’s even worse than making a mortgage payment after payment on a home that isn’t supposed to be yours for long? Falling short of the profit you should have made because you prioritized speed over a job well done.
PSST: Buyers (and the inspectors they’ll call in) can tell the difference between a rush-job and a flip done with care.
Step 8: Realistic Numbers
In the same vein as being realistic about your timeline, being realistic about your figures is going to save you in the long run as well.
The temptation to overestimate your potential property’s ARV in order to justify a higher maximum allowable offer (MAO) can be strong, but it’s not worth it.
Factors beyond your control could lower your ARV by up to 20% by the time you’re ready to sell, and if you’ve already overshot your original estimates, the math will be even uglier.
Step 9: Landscape
Please, do not neglect landscaping. Overhauling an entire lot’s worth of greenery isn’t cheap, particularly if it’s been neglected for a long time, but TLC that increases a property’s curb appeal is a valuable line item- it can add up to 10 perfect to your ARV!
No, you don’t need to plant a forest and build a water feature, but cleanup, repairs, and a bit of diligent gardening can go a long way.
Step 10: Less DIY, More Experts
We’ve talked about this before: Do not OD on DIY! As the Chinese philosopher, Lao Tzu said, “The wise man is one who knows what he does not know.”
As a real estate professional would put it, the wise first-time flipper knows that they must not try to remodel an entire kitchen by herself. This is another place for a mindset shift that will save you money.
It can be costly to DIY things as it can take you longer, require fixes after all, and buyers can likely identify a DIY job over a professional’s work.
Step 11: Check Out the Neighbors
Another costly choice you can make is finding a “diamond in the rough” in a neighborhood that’s a bit TOO rough.
Buying the underpriced, ugliest house on the block is many flipper’s favorite trick- but it’s easy to forget that though your place will be rehabbed and lovely by the time you list, other eyesores in the same neighborhood can impact its desirability (there’s a second-ugliest house out there, to).
Step 12: Don’t Skimp on the Bathroom
Next, do not cut corners in the bathroom. If your floor plan and budget can accommodate a full, modern bath, it’s worth your time. Many real estate experts argue that bathroom renovations provide returns on investment (ROI) comparable to kitchen renovations.
An outdated bathroom, by contract, can sink a sale. Updating an existing bath or adding a new bath are easy ways to add value to a home. If you want to know exactly how much, make sure to check your comparable market data.
Step 13: Replace vs. Keep
Spending more money to keep something rather than replace it can cost you serious money. Making decisions between replacing and keeping is a major job in the flip process, and usually, it’s best to replace.
There’s an idea that many people have about the cost of keeping vs. replacing. Several years ago, when the market was very different, I had a few projects where I kept the kitchen cabinets. They still needed some cleaning and work and at the end of the project all was well.
But now, with labor and material costs, I’ve found for the last few years it’s actually less expensive most times to install new cabinets. Not what you’d expect, but it just goes to show that it’s worth tracking so you can make the best choice for your budget.
Take the Next Step to Transforming Homes as a Flipper
Are you ready to transform homes yourself? I can’t wait to help you start your flipping business!
Start by joining the House Flip Blueprint! Learn everything you need to flip houses, join the waitlist here.
In the meantime, enjoy my free checklist of 8 Tips to Find the Perfect House to Flip. This checklist helps you identify if a house is worth your time (and money). These 8 things are exactly what I look for and help tremendously with the tough decisions.
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