5 Things You Absolutely Must Know Before You Start Flipping
By JD Esajian on May 20, 2016
House flipping and rehabbing is a great way to break into the real estate business. The popularity of this niche has exploded in recent years. It seems like every new real estate investor wants to flip real estate. While there is certainly good money to be made there is also some potential downside. If you don’t know what you are doing this is a good chance you will not have the success you desire. Before you start your first deal here are five things every new flipper must know.
- Get Your Team In Place. Getting your offer accepted and closed can be a draining process. One of the first keys to successful flipping is understanding that this is just the beginning. While nothing happens unless your offer is accepted there is still work to be done. During the weeks from acceptance to closing you need to get your team in place. You are on the clock the day your deal closes. Time really is money with every house flipping deal. You need to get your team working from day one. It is not enough to wait until you are the owner to place calls and check availability. Your contractor may be the best in the business but if they are booked for the next few months it won’t do you much good. Everyone on your team should be on board with your vision and ready to go as soon as you are. You can’t waste time trying to schedule an electrician or carpenter two days before you need them. As soon as your offer is accepted get on the phone and get your team in place.
- Understand All The Work And Costs Associated. The more experience you have in house flipping the easier the process becomes. One of the areas that many new flippers have trouble with is understanding exactly what the work entails. They may have heard from a friend that a kitchen demo costs a certain amount. That doesn’t mean the same costs will apply to your property. On your first few deals you should get as many project bids as possible. On these bids don’t be afraid to ask for the estimates to be broken down line by line. A real professional will have no trouble providing this to you. They will also let you know that this is just an estimate and the costs could increase if there are unexpected items. You should get in the habit of always planning for the unexpected. If you have just barely enough capital to cover your estimate you have little to no margin for error. This opens the door to a series of problems down the road. Before you start any work you need to know exactly what you are paying for.
- Negotiate Purchase Price. It is not enough to get your offer accepted. You need to negotiate to get the best possible deal. There are two schools of thought as to where you make your money with a house flip. One is that you make your money when you sell. The other is that you make money getting the best possible deal when you buy. Getting the best deal means only making offers on properties that you see future value in. It doesn’t do you any good getting a property that you can’t do anything with. The same is the case if you overpay. By overpaying you start the process behind the eight ball. You will be forced to cut corners throughout the process to make up the difference. By doing this you will not deliver quality work and not sell for maximum value. This could mean walking away from a few deals if the price becomes too high. It is better to pass on overpriced deals than be stuck with properties that never sell.
- Hire A Good Contractor. The most important member of your house flipping team is your contractor. They run the point throughout the process from start to finish. While there are many good contractors it can be difficult finding ones that are a good fit for you and your business. You need to take the time and fully vet who you are working with. Take about timeframes and goals. Discuss budget and availability. If you have a contractor you can trust you need to treat them like gold. Give them some room to operate and pay them when their work is finished. These little things can mean the difference between getting a project pushed to completion and waiting for work to be done.
- Understand Time And Work Commitment. Flipping real estate isn’t easy. As great as the potential returns can be house flipping requires time and effort. Before you get started you need to embrace the task ahead of you. Even if you have a great contractor that you trust you still need to get your hands dirty. There will be plenty of important decisions that you will need to make. You can save thousands of dollars by pitching in and doing whatever you can do. There will be long days and a few sleepless nights along the way. This is all part of the deal and what it takes to be successful. If you think everything is going to go smoothly you will be in for a rude awakening. Flipping takes time and hard work.
Doing the little things before and during your flip greatly increases your chances of success. Don’t wait. Now is a great time to get started on your first flip deal.