Completing A Successful Flip: Making The Right Moves
By Paul Esajian on November 3, 2014
Flipping houses is a lengthy and in-depth process. As easy as it may appear on TV, the process of acquiring a property, fixing it up and selling it quickly at a profit is a lot of work. This doesn’t mean anyone can’t do it, but to be successful at it you need to know what you are doing. Blindly jumping into a property or buying without a clear vision is a recipe for disaster. Flipping a property is a three part process: acquisitions, renovation and sales are all equally important. Prior to looking at any property, you should know what you are doing before you get started.
Any successful flip starts with getting the property at the best possible price. The best price doesn’t always mean the lowest one. There are times where you will have to pay above asking price to secure a property you see potential profit in. Finding deals can come from a variety of sources, including: your local realtor, marketing efforts or area networking groups. How you find the deal is not important, but knowing what you should pay for it is. Before you make an offer, you should have a good idea of the work needed, the after repair value and prospective sales price. Using 70% of the after repair value is a good guide, but it is not always the definite number. Each property and situation is different, but getting the property at your price is the first, and arguably the most important, part of the flipping process.
If you are not realistic with the amount of work needed and the costs associated, you will quickly find yourself scrambling just to break even on a deal. Getting the property at a great price is a good first step, but it is only that. The next piece of the puzzle is doing the right work at the right price. While you are evaluating the property, you should make a comprehensive list of everything that needs to be done and associate a cost with it. If you are unsure of the work or the costs, you should have a contractor available to help you with this step. Many new investors overlook or underestimate this critical step. This is often where any profits are made or lost.
Even if you have an idea of what work is needed, you should get multiple estimates on each job. There are still many quality contractors and handymen who are underemployed and looking for work. You never know when you will find someone who will do a job for you at the price you are looking for. Getting multiple quotes will also give you a better idea moving forward of just what each task cost to help you with future deals. The more people that give quotes to you the more people you can contact when you need someone down the road. It will also give you options in choosing the best price and the best person to work on the current deal. The more options you have the more room you have to negotiate.
When the work is nearing completion, you should start promoting your property and start getting it ready to sell. It is never too early to start looking for buyers. Some investors are hesitant in showing a property before it is done, but you can certainly start using social media and other contacts to get the ball rolling. As soon as the property is finished, you want to be able to get is sold as quickly as possible. If you wait until everything is done, you can lose valuable time to find a buyer. Every day that a flip goes without being sold or rented is costing you money. An average sale lasts between 30-45 days. Even if you find a buyer, the first day the house is on the market you are looking around two months before a sale is completed. You can expedite this process by using your relator, social media, bandit signs on the front yard and real estate sits on the internet to get the word out. Time is money with every flip so it is important not to wait until the house is done to get started.
In addition to marketing the property, you need to know what to list it for. If you list too high you won’t attract the interest you are looking for and if you list too low you may be leaving money on the table. It is always better to list on the lower side of the market to attract interest and get the property sold quickly. If you price too high buyers will lose interest and it will take a steep price reduction to get them back. This should be factored in before you take ownership of the property. If you wait to decide on a price until after the work is finished you may be effected if you are over budget and are now seeking a higher price to make up for it. Listen to your realtor’s advice on where to price and look at all the information available. The quicker you can sell the faster you can move on to the next property.
There are many successful investors that make a living focusing solely on flip projects. The opportunity is there, but you need to be prepared for everything that can come your way. The more you know before you buy, the more successful you flip will be.