Every time you turn on the TV, there’s yet another show about flipping houses. But did you know that they all share a secret: House flipping is a lot harder than it looks.
The good news? Experience is invaluable, and you can learn from those who’ve flipped before! Here are 17 tips from successful flippers with years of experience under their (tool) belts.
1. HGTV is Not Your Friend
We’ve all see this story: Cute couple buys a foreclosure at a bargain-basement price. The couple installs new light fixtures while giggling and splashing paint on each other. After a two-week, under-budget renovation, the couple sells the now-stunning house for a huge profit.
Except it’s not quite like that, because what you see on TV is a fantasy — that adorable couple worked with a professional team and a big budget. In real flips, things go wrong. But that’s okay because successful flippers still find ways to profit, even without made-for-TV endings.
2. Have a Plan
You need a Plan A, a Plan B, and an exit strategy. Consider the flip from start to finish; how much you can invest in repairs? Will you sell the home? Hold it as a rental? These details will guide your renovation decisions and keep you on track. Additionally, you will likely need a thorough plan backed with research in order to secure funding. Lenders want to know what you plan to do with the property before handing over any funds.
3. Find Funding First
Don’t even look at properties until you’ve secured funding. The last thing you want is to fall in love with your dream property and then have to pass on it when you find out your loan was denied. You need to know how much a loan will cost — including interest rates — before you can calculate an accurate ARV (after repair value). Not sure where to start? Sherman Bridge has a team of professional, experienced loan officers ready to walk you through your funding options.
4. Work With an Experienced Team
New to the game? Partner with a successful flipper to learn from their experience. Research contractors to ensure they can handle your project. Recommendations, referrals, and advice from local real estate professionals will be invaluable.
5. Don’t Jump on Every Deal
Resist the (completely normal) urge to snap up the first property you see. Rushing in and making a poor decision can mean huge differences in profits, so take your time and view multiple homes. There will be more “deals of a lifetime”!
6. Have Realistic Budget Expectations
Work with experienced contractors to gather estimates and determine the most accurate ARV; this should drive how much you pay for a property. Not overpaying is key, as small miscalculations add up quickly.
7. Resist the Urge to DIY
You may be tempted to save some money by tackling repairs and upgrades yourself, but it may be best to leave the hard work to the professionals. DIY projects are not as easy as they look on TV and you likely won’t ever learn to do contractor-quality work by watching YouTube videos. Sure, you could cut down on labor expenses, but the cost of a DIY project gone wrong is not worth the risk and unprofessional work could keep you from getting your draws. A DIY project will also take you much longer than it would a seasoned professional, and you likely will not want to delay your project.
8. Hold Contractors Accountable
At some point in the flip, problems will arise. Take a proactive approach: early in the process, create a clear contract that establishes who will handle problems (and how). Holding your contractor to the contract is key, even if you don’t like confrontation.
9. Don’t Over Do It
It’s natural to work toward what you want the house to be like… but remember, you’re not renovating your dream house. Don’t over-improve, because you won’t make back your money.
10. Stay Involved
Once contractors start work, it can be tempting to relax and let them do their thing. Bad idea! Remain highly involved to ensure the flip stays on track and on/under budget.
11. Understand Comps
Which features add value and which aren’t worth the investment? All comps are not created equally, so partner with a local real estate agent to gain an understanding of comparable properties in your area.
12. Be Flexible on Price
When you’ve invested so much time, effort (and money), remaining flexible on the selling price can pose a challenge. But consider that flexibility will help you sell quickly and avoid holding costs. Plus:
- It’s better to sell for less money than to not sell at all; and
- The faster you sell, the sooner you can move to the next project.
13. Don’t Overlook the Small Stuff
With so many moving parts, it’s easy to overlook details — especially if you’re flipping more than one property. With the finish line in sight, investors may be less likely to focus on small details while getting ready to exit. Closing is a busy time and sellers have a lot on their minds, but forgetting tasks like canceling utilities and insurance can cost thousands, so be sure to mark this off your to-do list before you hand over the keys.
14. Track Successes and Failures
Keep track of what works and what doesn’t throughout the process. By learning as you go, you can use your new knowledge to make your next venture more profitable. While it may be easier to focus on the high points of the flip, keeping thorough documentation of what didn’t work and, more importantly, what you’re doing to fix it will go a long way to helping you secure future funding on your next deal.
15. Consider Becoming a Real Estate Agent
Not only will you save on commissions when you sell homes yourself, but you’ll also grow familiar with real estate laws and practices. Plus, you’ll boost your credibility as a seller. It’s a win-win!
16. Extend the Flip
Need extra income? Consider renting the flip for a year before selling it. Of course, this may not be possible if your cash is tied up in the flip.
17. Treat Flipping as a Job
Your flip will be more successful if you treat it as a job, rather than simply a source of passive income (if that’s your goal, consider becoming a landlord, instead). If you don’t have the time or the drive to invest in the process, flipping may not be for you.
When it’s done right, flipping has the potential to bring in great profits. As you go through the process, you’ll gain experience that will be invaluable to your next venture. When you’re ready to find funding for your flip, Sherman Bridge offers low rates and fast approval to help you get started now. Don’t let financing red tape keep you from purchasing your next project. It only takes 30 seconds to prequalify for financing and you could be fully approved in just 30 minutes.