Almost everyone has watched at least one of those fix and flip shows about buying a home to fix it up and sell it at a profit. But just watching those shows doesn’t always give as much information as is needed to make a successful flip happen. Here are a few commonsense, though not always followed, tips to make sure you come out ahead and are not left drowning in a swamp of debt and half-finished projects.
1. Start in the Right Place
First, make a budget. Once you’re done, calculate 10-20% of the total and set aside that amount. This rainy day fund can compensate for those problems that can sneak up along the way. Code violations, faulty plumbing or wiring, construction and remodeling delays, and more. It also means you’ve got enough to cover contractor and labor fees if they end up costing more than estimated.
2. Hire Specialists
This process starts at the beginning: use a real estate attorney. Don’t approach the situation trying to save money using your family member who is a criminal attorney or your friend who is still in law school. Real property transfers are sometimes very complicated and need a particular set of skills or knowledge – this will ensure you don’t find yourself in a lawsuit right when you need to sell your finished property.
Once you’ve found the property and you are ready to start, there’s a lot you can do yourself with some basic knowledge and tools, but there are also a lot of problems you can cause by using guesswork and your own labor where a professional’s attention is needed. Even with technicians, be selective. Using a general contractor when in fact you need an individual with specialty plumbing knowledge is not the right way to go. You may save a few dollars upfront, but in the long run it could cost you a sale or, even worse, force you to tear it all out later in the game and redo everything. Plan for the cost of skilled and experienced people.
3. Curb Appeal and Interior Decoration
If you’re in the market to flip a house, appearances go a long way. Planting a few flowers, paying attention to walkway and driveway conditions, replacing a mailbox, and staging the front porch if it’s a key selling feature are a great way to make a property more appealing to passers-by. Also, make sure there is a sprinkler system installed if it’s needed and that lighting is not just adequate but excellent for both safety and aesthetics as well. A beautiful property is always going to draw more attention than a drab one.
Keep interiors fairly neutral in more permanent features like the paint, tile work, flooring, and window coverings. Neutral palettes allow people to picture their own furniture and décor easily in the spaces. But when you are ready to start showing the home, stage it. If you need a professional decorator to help, hire one. Using pops of color with the staging will take away any bland feeling from a neutral background, but don’t go crazy – pops of color means exactly that: just a bit here and there.
Ultimately, you need to try to make it all as simple on yourself as possible. There will be stress during the flipping process, and until you’ve got the check in your hand after a sale, it may not be easy to relax. Remember, this can be a great way to amp up your net worth, but there are risks. Keep them minimal with these tips, and happy house hunting!
About the author: Allen Shayanfekr, CEO and Co-Founder of Sharestates, an online marketplace for real estate investing.