Categories
Flipping

5 Signs You Better Walk Away from a Flip

Finding houses that are suitable for flipping is difficult – but that doesn’t mean you should jump on every opportunity that comes around.

Every good flipper knows how to choose properties—and when to walk away from an inevitable flop.

You don’t want to be a rookie who overlooks the basics and ends up with a smaller margin than your time and effort is worth.

So here are five signs to know when a distressed house is better left alone:

1. The location isn’t good.

The most important factor that decides the value of your flip is the location of the house.

  • What kind of city and neighborhood is it in?
  • What kind of residents are in the area? What do they want in a home?
  • How much do similar houses sell for in the immediate area? What features do they have?
  • What are its positive factors (e.g., good schools, shopping centers, etc.)?
  • What are its negative factors (e.g., highways, airports, factories, etc.)?

You need to understand the property in the context of where it’s located to estimate its value, and how fast it’s likely to sell (based on the level of buyer demand in the area). 

Do the same research that your buyers would do, and you’ll see if the location is going to appeal to them.

2. The house is too unique.

While every property will be somewhat different from another, you want to flip a house that’s fundamentally conforming to or better than the standard of the local competition. In other words, they have to be similar to the houses around them, but better somehow.

For example, if the neighborhood is full of single-family homes with 3 bedrooms and 2 bathrooms, you might have a hard time selling a house with 2 bedrooms and 1 bathroom. You will, however, easily sell a 3-bedroom, 2-bathroom home with an attic that can convert to an office area.

Generally, people like lots that are higher than the average size in the neighborhood, so a large lawn is always a good distinguishing feature. Likewise, you might have to be prepared for price adjustments if your lot is smaller than the average locally.

The biggest thing to look out for is a strange floorplan. Awkward layouts will seriously turn off buyers, even if you finish a home to a high standard throughout, and some layouts can’t be changed easily (if at all). Honestly, if you end up with a seriously out-of-date floorplan, you could be better off completely rebuilding a house from scratch in some cases, so this is a definite sign you should walk away if you’re a new flipper.

3. You don’t have enough skills or knowledge.

Unlike professional builders and professionals who’ve been honing their skills for years, you might not have the necessary knowledge to DIY fixes for a higher profit.

  • Do you know your way around basic construction tools?
  • Can you lay carpet, hang drywall, roof a house, and other common but important fixes?

There is money in sweat equity. If you lack knowledge and have to constantly outsource professionals to do the renovations, you’ll deplete the profit you could’ve gotten from your investment. If you lack the skills and still try to fix everything yourself, you might end up making rookie mistakes that’ll be expensive to salvage.

Furthermore, if you don’t have enough knowledge, you could run the risk of hiring a contractor and getting ripped off.

Instead, be realistic and account for your lack of skills when budgeting your flip. If the costs are properly accounted for, you’ll increase your chances of exiting with a good flipping profit.

4. You don’t have enough money.

All real estate investments are expensive.

You need to research your financing options to find which mortgage type will work best for you, and if there’s a lender that can offer you lower interest rates. Cash is possible, however there’s still property holding costs and opportunity costs that you need to consider.

More importantly, there’s the renovation costs. How much will you get after acquiring, holding, and fixing up the house? Novice flippers often underestimate the costs, resulting in net loss instead of gross profit.

To see if your budget is enough to flip-and-sell a house, you need to:

  • Identify how much you need to acquire the property
  • Scan the competition and see how much you can realistically sell and still make a profit
  • Determine how long the renovations will take and budget accordingly
  • Remember to take into account the loan you’ve taken out, taxes, utilities, insurance, and more
  • Be aware of the seasonality that can sometimes affect home prices and the number of days on market (e.g., higher sale prices in late spring compared to winter)

5. You don’t have enough time.

Flipping and selling a house takes a lot of time and dedication—often requiring you to give up a large chunk of your time for a couple of months. 

Not sure if the hours dedicated to flipping will be worth it? Answer these questions:

  • Are you maintaining a separate full-time job? Are you willing to give up weekends and evenings?
  • Do you have the budget to pay someone else to do the work?
  • Will you be available to oversee demolitions, constructions, inspections, and other procedures?
  • How much time will you spend marketing your property? Can you show it to prospective buyers yourself, or do you have the budget to pay for a real estate agent’s commission?

For most people, the time all of this takes isn’t worth it. They’d rather stick to their day job to have a guaranteed income, without the headache of flipping houses, so think carefully about whether or not this commitment is right for you before buying your own investment property. 

Summary

To be a successful flipper, you need to understand the risks involved and how to mitigate them.

Evaluate your house flipping opportunities by doing the following:

  • Check the location of the house in relation to the neighborhood.
  • Determine if the house is competitive enough versus other properties in the area.
  • Budget property and never underestimate the possibility of expensive, underlying problems.
  • Calculate the time it’ll take for you to enter and exit the flip profitably.
  • Be realistic with what you can repair and what you’ll need to outsource.

Making profit from flipping houses isn’t as easy as some other real estate investment methods, but it’s definitely possible with the right knowledge, planning, and courage to walk away from bad opportunities. Keep looking and doing your due diligence, and the right one will eventually come along. 

Trust us, it’s worth the wait.

Categories
Flipping

How to Market your Rentals Online: Screen Appeal and Listing on Digital Platform

From digital walk-throughs to Zoom tenant interviews, real estate marketing has officially transitioned to digital in light of the COVID-19 pandemic.

Virtual showing techniques aren’t new, but COVID-19 has certainly pushed the industry to adapt as a necessity. Landlords that didn’t have videos of their properties pre-COVID are now rushing to create virtual tours and trying virtual staging methods.

At this pace, digital marketing will fast become an integral and permanent part of real estate marketing before we realize it!

What does this mean for landlords? 

Prospective renters are now viewing and shortlisting properties from their screens, making “screen appeal” a crucial factor to promote your rental property. You want your offer to stand out where the prospective tenants are: online.

In this article, we’ll go through the ways to increase your property’s screen appeal, write an effective ad online, and list your properties where tenants are most likely to find them.

Increase screen appeal with noticeable features

First, you need to make your rental look impressive in photos. To do this, invest in features that will stand out in photos—even if the prospect browses on their tiny phone screens. 

These are the things that will make a huge difference in digital listings:

  1. Sparkling kitchens with shiny appliances, glossy countertops, and newly-painted walls and cupboards
  2. Spotless bathrooms with new showerheads, clean mirrors, and re-grouted tiles
  3. Fresh blinds and curtains without any mold or grime that are updated to fit the aesthetic of the property
  4. Blemish-free walls freshly painted with a color that makes the room look bigger, brighter, and homier
  5. Brand-new fixtures everywhere—from light switches to faucets to doorknobs and fly screens
  6. Clean carpets that even look like they smell great
  7. Bright lights in every room to make the rental property feel new, and more importantly, show that you’re confident enough to put everything in the spotlight

Make sure that you use a camera that does your rental justice! None of the spectacular features you updated and cleaned will be seen if you use the front camera of your beat-up phone. If you need to hire a photographer for decent equipment, it’s worth the one-time payment to get a lifetime of great photos for your listing. 

Write an effective ad that highlights relevant details

Once you’ve updated your rentals with photogenic features, you need to post them on digital platforms. But what do you say? How do you write an effective ad that attracts your tenant pool? 

Here are the important factors to focus on:

  1. Write a great headline. Rentalutions’ formula suggests including the key information tenants look for (e.g., number of rooms or location) plus one feature that makes your rental unique.
  2. Use professional word choices that add value to your listing, as long as they’re an accurate description of your property. You want to avoid generic words such as “great” and “nice”, instead, choose words like: upgraded, spacious, tasteful, landscaped, modern, luxurious, and charming.
  3. Add more information on the key features. Knowing what tenants want (as you should), make sure to highlight these features in your ad. Are you expecting to attract tenants who put importance on parking spaces, walkability, nearby supermarkets, or proximity to a great school? Your copy should indicate that.
  4. Add detailed property descriptions. Similarly, also indicate what the tenants will want from the property itself. How many rooms, floors, and bathrooms? Will they be attracted to a lush backyard or extra storage areas? Flesh out all of the important details to attract tenants.

Lastly, prove what you said with great photos! When you use great photos to compliment everything that you verbally promoted on your listing, your screen appeal will skyrocket. This is where the prospective tenants should go “Wow! They weren’t kidding!”

List your rental on industry-popular websites

Armed with your impressive photos and well-written ad content, it’s time to post your listing where it matters. Most people are baffled by how many options there are to list online, especially since there isn’t a one-stop-shop solution that posts to all the rental listing sites. 

Zillow—the favorite of most landlords—allows you to create detailed listings that they’ll syndicate out to 26 partner sites (including Trulia, Hotpads, and MSN Real Estate), but it still doesn’t cover all of the sites available.

To get started, check these sites that are known to be effective and user-friendly:

  1. Zillow
  2. Trulia
  3. Hotpads
  4. Craigslist
  5. Facebook

Apart from those, you can also consider these lesser-known platforms:

  1. Apartments.com
  2. Apartment Finder
  3. Apartment Guide
  4. Apartment Home Living
  5. Apartment List
  6. Backpage
  7. Byowner.com
  8. Cozy
  9. Doorsteps
  10. Move
  11. My New Place
  12. Nextdoor.com
  13. Oodle
  14. Realrentals.com
  15. Realtor.com
  16. Rent.com
  17. Rentals.com
  18. Rentdigs.com
  19. Rentlinx
  20. Saletraderent.com
  21. Sublet.com
  22. Walk Score
  23. Zumper

All of these websites allow you to post for free. You just need to do some research and decide which platform enables you to attract the tenants that you want. For more details on the sites we mentioned above, check Smart Move and Landlordology.

Conclusion

Technological development waits for no one. In order to keep up and remain competitive in the rental property business, it’s time to level up with online marketing!

The steps are easy enough—simply increase your property’s screen appeal, write an effective ad describing the best parts of your property, and list them on websites where tenants are likely to browse for new homes.

Any other tips on how to market rentals online? Where are your rentals listed so far?

Image courtesy of Rene Asmussen

Categories
Flipping

How to Get a Loan for Flipping Houses

Flipping houses can be a lucrative business. However, it takes a large amount of money to acquire, fix up, and sell properties quickly!

In fact, flipping houses takes more money than you’d think. On top of the acquisition cost, you still have to pay for the renovations, taxes, utilities, and homeowner’s insurance from the time you acquire it until the time you sell.

If you’ve realized that, and are looking for a way to finance a flip—you’ve come to the right place.

Off the bat, you should know that the process for securing loans for flipping is different versus getting a loan for a home to live in or rent out. You can’t go to traditional mortgage lenders, because many don’t loan money for fix-and-flip projects.

Instead, you’ll go typically through a hard money lender (HML) or private real estate lender. These money lenders loan money with the intent of getting repaid quickly (and charge much higher interest rates), so they are often used for flipping houses.

Up for the challenge? Read on to know how to secure the loan you need to finance your flip.

How loans for flipping houses work

Most loans for flipping houses come in 6-18-month terms, with 12-month fix-and-flip loans being the most common.

Some loans have an initial term with an option to extend. These are generally interest-only balloon payment loans with a fixed interest rate. So, if you get a 12-month loan, you’ll make monthly interest payments for a year before paying the entire principal balance at the end.

In some cases, lenders offer investors the option of not making any payments initially, then just repaying the principal with accumulated interest at the end of the term.

Loans for house flipping cover the entire project—property acquisition and renovation included. The maximum loan amount is calculated in two ways:

  • Loan-to-Cost (LTC): A percentage of the project’s anticipated cost, where the estimated loan amount is divided by the total acquisition, construction, and renovation costs
  • Loan-to-Value (LTV): A percentage of the property’s expected market value after project completion

The decision isn’t up to you, as lenders will default to whatever the smaller loan amount between the two.

How you can qualify for a house-flipping loan

While applying for a traditional mortgage mainly relies on your own ability to repay the loan, applying for fix-and-flip loans is more focused on the property itself and your business plan for it.

You need to justify the loan with a satisfying after-repair value (ARV) and show a realistic renovation budget and timeline. In other words, for house-flipping loans, the lender puts more importance to the LTC and LTV than your income and personal assets.

Where to look for lenders

Ready to take the plunge? Here are some of the places you can find funding for your house flip.

Websites

There are plenty of places to find HMLs online, like Lima One Capital and LendingHome (NOTE: we are not endorsing any of these lenders!).

Lima One Capital works with flippers and will lend up to 90% of LTC or up to 75% of LTV, with the fees and interest rates decreasing with a borrower’s flipping experience.

On the other hand, LendingHome offers house flipping loans for up to 90% of the purchase price and 100% of renovation costs, with just a couple of fees and requirements. Their interest rates range from 7.5% to 12%, and the company holds back repayments until after the renovations are complete.

Private lenders

Compared to HMLs, private lenders may be more open to negotiating payment terms or even become a partner on the deal—taking a share of the profits instead of charging interest. They often charge 8-12%, plus 0-2 points, compared to a HML’s 12-15% with 2-5 points.

You can seek out private lenders in real estate networking events— just be confident in approaching and negotiating. You can also find them online, just like HMLs. You can try direct mailing those you find in data broker websites or posting about your project in websites such as BiggerPockets, LendingClub, or LendPost.

Crowdfunding

You can crowdfund, but there are many legal conditions. Just be aware of state and federal rules. For example, you can’t advertise. They are also strict with reporting—you have to report the right information and structure your dealings properly.

Despite these roadblocks, it’s completely possible to crowdfund a flip. Plus, crowdfunding has been a strategy for decades, although in a different form. Before online crowdfunding websites became popular, people simply combined investor money into an entity (such as an LLC).

Conclusion

If you want to flip houses but don’t have enough money—or if you want to protect your savings—there are plenty of ways for you to get a fix-and-flip loan. These funding options can give you the financial boost you need to achieve your house-flipping dreams!

Remember that fix-and-flip loans are often more expensive than traditional mortgage financing, as there are higher risks involved for the lender. However, outsourcing your funding allows you to get started in the flipping business with little capital and gives you the ability to flip more properties simultaneously to increase your overall profits.

Imagew courtesy of Anastasia Shuraeva

Categories
Flipping

Flippers: The Best and Worst Renovations

Never over-renovate your flip!

You’ll shoot yourself in the foot if you end up spending too much on repairs or upgrades to the property. 

Your goal is to make money from buying a distressed house under market value, fixing it up to a marketable condition, and selling it at a price higher than the acquisition and renovation cost. So, it’s crucial that you hit the sweet spot of renovating the house just enough to achieve maximum ROI. 

But how will you know what to fix, and what to leave for the future buyer? Which renovations will add value, and which will only hurt your chances of making a higher flip profit? 

Here’s our guide to help you decide:

Know the Best Renovations

  • Competitive Scan

First and foremost, scan the other houses in the area where your flip is located. Research what else has sold and what factors they have in common. Figure out what the market gravitates towards and prioritize the same things in your renovations. 

  • First Impressions

First impressions are important for potential buyers. Anything that will add to your flip’s curb appeal will help attract attention, making buyers curious to see what’s inside. To achieve this: 

  • Have the front door stand out with a contrasting color
  • Maintain the landscaping (if there is any) with fresh flowers and plants
  • Power wash anything that looks dirty or faded
  • Repaint all trim work for a polished look 
  • Replace any old exterior hardware (e.g., doorknobs, mailbox, outdoor lighting, window frames)
  • Add shutters or blinds to avoid the house looking empty/unlived in
  • Kitchens and bathrooms

Kitchens and bathrooms are two of the most important features when it comes to buyers deciding on a house. They’re also much more expensive to overhaul, so many buyers don’t want to have to renovate kitchens or bathrooms themselves. 

But kitchen improvements can help recoup your investment by as much as 66%, so this is one area where you definitely want to spend. 

On the other hand, anything you spend on bathroom improvements can yield an ROI of up to 67.2%, so they’re also a good investment when planning the budget for your flip. 

  • Attics and basements

Attics have come a long way from being a horror movie location to, now, a great expansion and additional space in the house. It’s possible to get back as much as 73% of your investment when the property’s attic is converted into a bedroom or some kind of usable room for potential buyers. 

This is an expensive renovation though, so make sure you do the math properly to make sure it’s worth it for your flip.

Know the Worst Renovations

  • Competitive scan

When you check out other houses in the area, also pay attention to what won’t sell. Each area will have their own preference. Make sure you avoid having similar features as houses that have sat in the market the longest.

  • Extreme tastes

Focusing on renovating the property with elements that will appeal to the largest buying audience. Instead of decorating and renovating based on your own taste, fix it up with the general public in mind. Don’t put any design or functional feature that’s too specific and only caters to niche markets, like crazy, bold colors or wooden countertops. 

  • Home Offices

Even though work-from-home set ups are increasingly becoming popular since the pandemic, most people still don’t need a full-blown office at home. At the maximum, you can recoup around 43% of your investment by adding one to your flip.

If you see that home offices are actually popular in the property’s area, in particular, you can just have a home office that can easily be converted into a bedroom, should the future owner chooses to. An extra bedroom adds more value, too.

Profit is what you want out of your flip at the end of the day. 

To do this, you have to renovate objectively, with your ROI in mind, and not think about trying to turn your flip into a house you’d want to live in yourself. 

Begin with a solid renovation plan, and a carefully calculated budget, and make sure you don’t spend too much money in the pursuit of the “wow” factor.

Image courtesy of Pixabay

Categories
Flipping

Do Flipper TV Shows Help or Hurt the Industry?

Ah, the world of reality TV shows. Most of us have a love-hate relationship with these, as they supposedly mimic real life, yet need to be entertaining enough to make us forget about actual reality. But is that irony helping or hurting the flipping industry?

Over the years, reality shows centered around house flipping have remained amongst the most popular on TV. Just a quick search and you’ll see The Vanilla Ice Project, Fixer Upper, Genevieve’s Renovation, Flip or Flop, and My First Place – all exciting demonstrations that expose newbies to the real estate business.

So, are these shows a force for good – helping to encourage flippers and grow the industry as a whole – or are they making flippers’ lives more difficult?

The Good
These shows might be helpful to the market, as they introduce the real estate business to a wide audience, showing them the appeal and benefits of flipping houses.
They often reflect real-life house-flipping experiences, informally preparing people for what to expect – like how properties often have hidden repair costs. Fortunately, this also makes for an exciting narrative.
They may, therefore, help scare off people who realize that the trials and tribulations of flipping houses aren’t their cup of tea (or maybe not).
They’ve made flipping so widely-known that it’s not hard to explain to buyers and sellers the value of what you do (compared to other REIs, like wholesalers).

The Bad
The flipside of flipping’s TV popularity is that buyers and sellers alike may assume you’re in it to make a load of money, making negotiations more difficult.
These shows might very well be responsible for encouraging people to get into flipping before they’re fully prepared, i.e. committing to a huge investment, equipped only with information that was intended more for entertainment than education.

These newbie flippers will make mistakes on their pricing, leading them to overpay for properties. This makes it more difficult for experienced flippers to make money and stay in business.

In a worst-case scenario, these flippers end up negatively affecting the properties they work on – turning homes into worse shape than how they started, and with too much debt to be restored by anybody else.

The Conclusion
Real estate investing – especially flipping – can be quite lucrative, but that’s because it’s also quite risky. That’s something which reality flipping shows actually capture pretty well.

What they don’t communicate as strongly is the fact that, when you’re flipping houses, you really have to know what you’re doing, because it requires a huge financial and mental commitment from your end.

That said, it’s vital to know where and when entertainment deviates from reality. Oftentimes, these shows play down the risks (the cost and process of renovating and selling a house) and play up the benefits (the “insane” profits you’ll get in a short amount of time). So make sure you do your research if you’ve been inspired by one of these shows, so you don’t end up stuck with a half-flipped house that nobody wants.

Remember that the ones being featured on these series are experienced professionals – so make yourself as knowledgeable as possible before trying to follow in their footsteps.

Any stories about flipping TV shows impacting your real-life flipping business? Share them below!

Image Courtesy of Monica Silvestre

Categories
Flipping

Can You Make Money Flipping Blighted Houses?

Are blighted properties diamonds in the rough for property flippers?

Many investors were attracted to Metro Detroit when they heard about $500 houses for sale on eBay. Now, it’s more like $10k a home, but can you still realistically make money by flipping these?

What are blighted properties?

Blighted houses are abandoned properties in derelict or dangerous condition. They might have overgrown lawns, dilapidated roofs, broken doors and windows, or other signs of neglect. These houses have been deemed uninhabitable, and need either complete renovations or a tear-down to become livable once more.

Where are the blight areas in Metro Detroit?

There’s a big difference between a blighted property and a blighted area. You should be able to make money flipping a blighted house in a neighborhood with solid buyer demand, but flipping for profit in a blighted area is another story – so it’s important to know where you’re buying.

You can see plenty of blighted areas in the City of Detroit, due to the area’s history, which saw the population plummet by nearly two-thirds in the 70s and 80s. Residents left, causing a corresponding loss of tax revenues, resulting in significant cuts to city services. 

This led to neighborhoods full of neglected, vacant properties. You’ll see this in Brightmoor, Burbank, Ravendale, State Fair, Grixdale Farms, Petosky-Otsego, NW Goldberg, and Westwood Park, where roughly 30-40% of buildings are unoccupied.

However, this isn’t the case across the entire Metro Detroit area. You still have the “Ring Cities” surrounding Detroit, which don’t have these blighted areas. Overall, the Metro Detroit real estate market is generally healthy.

Are blighted property flips profitable?

So, many people are curious about the potential “flippability” of these houses in blighted areas. Can you make money from flipping them? We’ll have to go back to the basics of how a flip can be profitable in the first place.

What’s important when flipping a house? 

  1. You Need to Get It at a Good Price

Like any real estate investment, you need to acquire your blighted house at an excellent price to achieve a decent ROI. 

This applies to tear-downs as well–which is a common situation for blighted homes–where you actually just want the land that a house is currently sitting on. You’ll need to buy the property cheaper than a bare plot of land, because of the additional cost to demolish and remove rubble. 

  1. You Need to Renovate Fast and Efficiently

At the heart of every good flip is a fast and cost-efficient renovation, which requires accurate prediction of the overhaul costs. If you’re a beginner, correctly budgeting for a blighted property flip can be quite tricky. There can be a lot of hidden, expensive problems within their walls! 

This is exactly what buyers of $500 houses didn’t realize–a deal on a blighted house is often too good to be true. Did you consider that it’ll be a knockdown? Is the layout of the house costly to change) even good?

If you’re buying a blighted house in a blighted neighborhood, renovations will probably be a nightmare. It’s not uncommon to experience break-ins, theft of materials, and vandalism (all of which equal additional costs and headaches) – and after all that, you still likely won’t be able to find a buyer at a profitable price. Which brings us to our next point about flipping blighted properties…

  1. You Need to Sell It at a Profitable Price

You need to sell it at a price that makes financial sense. Look for a price that’s 70% of its market value, minus repairs. It actually takes a special skill to find distressed properties and negotiating it down to a profitable price! So keep this example in mind: If the house will sell for 100k fully fixed up, and it will cost you 30k for renovations, then you should pay no more than 40k.

70% x $100,000 (market value) = $70,000

$70,000 – $30,000 (repairs) = $40,000 

If the math doesn’t add up–steer clear. You can end up spending more money fixing than acquiring, but don’t overspend and end up with a house too expensive for the area. Which leads us to our next point…

  1. You Need People to Want to Buy

You don’t want to be stuck with a fully-renovated house that nobody wants. Your flip needs to be sellable at the price you need, within the time you have, to a willing market, in the right area. 

Maintaining and holding a vacant property while you wait two years for a buyer doesn’t make financial sense. So make sure you’re confident that there is a market for what you’re fixing up, – which, if it’s in a blighted area, there almost certainly isn’t. (In the City of Detroit, some abandoned areas have steadily improved, but it’s still a slow process.)

It may be hard to believe, but you can still lose money, even if you’ve only paid a couple of dollars for the house. You may buy it for next to nothing, but end up spending so much money and time renovating it, that it costs you more than what you’ll sell it for. And what happens if people don’t buy it at all? This is why it’s important to know the difference between flipping a blighted house in an up-and-coming area, versus flipping in blighted neighborhoods.

If you have great experience in restoring and selling neglected properties, and you’re in an area that does have buyers, and you have enough contingencies in case it doesn’t fall through, then you’ll probably make a lot of money flipping blighted houses. Experts will benefit from its high-risk-high-return factor. 

However, it’s never a safe bet. If you’re a newbie, you might want to avoid this type of real estate investing for now (and stick to Ring City properties instead, where the risk is significantly lower). Flipping blighted houses is definitely not for the faint of heart!

Have you thought of flipping blighted houses? Or maybe you’ve done it already? It’d be great to hear from you below.

Image Courtesy of: Webdexter Apeldoorn

Categories
Flipping

Time vs. Cost: What Jobs are Worth Doing Yourself?

Don’t you love it when people watch house flipping and renovation TV shows and say, “wow, it looks so easy to flip houses for great returns”? But the reality is that flipping is a risky business that requires a lot of hard work, excellent project management skills, and savvy budgeting in order to succeed. 

One of the most important parts of flipping houses is the way you restore it for reselling. Some flippers like to do nearly all the renovations themselves to save on costs, but others would rather pay contractors to do it to save on time. Many also opt for a mix of DIY and professional contractors, but in this case, which jobs should you handle yourself, and which are best left to the pros? 

While it’s generally cheaper to DIY, those savings could be nullified if you do it wrong and end up with expensive corrections. And while some tasks might look easy, you need to give up significant hours of your own time to learn and accomplish them. So if we look at the time/cost benefit analysis, which jobs are worth doing yourself?

PLAN OUT THE RENOVATION

Before you start swinging a hammer in good faith, go over the whole property and list down all the repairs that it needs, taking into account the cost and lead times for each. If you’re going to DIY, you have to be able to accurately calculate their costs and realistically estimate the time it will take to complete, as well as the order in which projects should be carried out.

DO WHAT YOU KNOW, HIRE WHAT YOU DON’T

SKILL REQUIREMENTS

Fixing high-ticket areas like the roof, floors, and kitchen areas yourself can save a lot of money, because professionals usually charge a premium for these services. However, the reason for that is these tasks require a high level of expertise to do them well. When done poorly, constantly repairing them will outweigh the money you supposedly saved by doing it yourself. 

You might be charged anywhere from $300 – $10,000 for a professionally installed drywall, while you can do it yourself for significantly less. Similarly, painting will cost you $2-3 per square foot if you get it done professionally, whereas you can do it yourself for just the cost of the paint – it also has a low skill requirement, so not much can go wrong if you DIY. 

So if you have experience in doing these, by all means, DIY. But being inexperienced will only leave you with wasted time, accidents, more repairs to fix, and a lower flipping profit.  

PAPERWORK REQUIREMENTS

Some repairs require specific building codes, permits, and inspections, like removing walls or installing new bathrooms. Better steer clear from DIY-ing these, unless you plan to leave your full-time job to be a contractor yourself. A professional will help you with the paperwork required and provide knowledge if the wall is load-bearing, or if you’d need more space for a bathroom. Their work is also insured, so if anything does go wrong, you’ll know that it’s covered.

A GENERAL GUIDE

Which jobs you do yourself should be based on your skillset and condition of the house, as well as permit requirements. Some jobs will require a licensed professional, like installing complete new plumbing, which you need a permit for, unless you want to get a citation from the city. A homeowner can pull their own permit in most states, without a license, because the homeowner is the one taking the risk. But if you do it wrong, you could have an electrical fire, etc., or end up failing your building inspection and being told to redo it.

However, this list should give you a general guide on when to DIY and when to hire a professional:

DO IT YOURSELF

  • Fix an outlet, doorknob, lights
  • Painting
  • Install baseboards
  • Install laminate flooring or luxury vinyl
  • Insulate open walls
  • Install a toilet (bowl)
  • Install minor PEX plumbing

HIRE A PROFESSIONAL

  • Additions
  • Replacing sidewalks and driveways
  • Replumbing the whole house
  • New electrical service panel and circuits
  • Replacing windows
  • Install solid hardwood flooring
  • Installing a furnace or central AC

Timing is everything with a flip, so work within your set of skills. Consider splitting the workload between you and a contractor who can compensate in places where you struggle. That way, you can focus on the things you know how to do, and still save yourself some money. At the same time, you’re not being slowed down by more complicated projects which will take you as a DIY-er much longer than a professional team to carry out.

What are the fixes you DIY when you flip a house, and which do you always leave to the pros?

Image Courtesy of Laurie Shaw

Categories
Flipping Landlords

How to Target Metro Detroit Landlords with your Flip (Part 2)

Last week, we looked at how to plan your flip to target an owner-occupier buyer in Metro Detroit. This week, we’ll take it a step further and consider how to market flipped properties to another kind of buyer, and one which most flippers wouldn’t necessarily consider right off the bat: landlords.

Landlords are probably not going to pay as much as an owner-occupier would, but they could be a consistent buyer for your properties, so building relationships with local buy and hold investors could be a great back-up strategy for marketing your flips.

Especially in the current economic environment, having a consistent buyer for multiple properties could be a serious boon for flippers. More people are choosing to rent long-term rather than buy, and this trend is likely going to continue as we slowly recover from the financial strain caused by coronavirus. But, while first-time buyers could be shying away from buying now, investors are always on the look out for a good deal.

So, here are some points to consider when targeting Metro Detroit landlords as buyers:

  • Landlords are Investors, Just Like You: This means they won’t be sold purely on light, airy spaces and nice kitchen counters – they want to see the hard numbers when making their decision. Highlight the financial benefits of the property when marketing to them, like whether the area has low vacancy rates, the rent-to-price ratio, and CapEx projections for any maintenance that will be required in the coming years.
  • Lower Margins: Buy and hold investors will be looking for a deal, and in Metro Detroit they’re unlikely to be looking for a single family home that costs several hundred thousand dollars, meaning your margins on each sale will be lower. However, you may be able to compensate for this in the volume of sales you do, since a landlord could become a guaranteed buyer for multiple flips. If you build relationships with local landlords, you can also do off-market deals with them, saving both of you time and money spent on marketing and agents’ commissions.
  • Out-of-State Buyers: When you consider the fact that the rental market in Metro Detroit attracts tons of investors from out of state – and even overseas – to the area in search of high rent-to-price ratios, you can see how marketing to this group can significantly widen your pool of buyers. Most of these out-of-area investors look for properties that are fullyrehabbed and ready to rent out, meaning a fresh flip could be the perfect choice for them.

Many of them also look for ‘turnkey’ rental opportunities, meaning properties which have a tenant and property management company in place, so you can find a tenant and then sell your flip as an active rental investment. You can also partner with a local PMC to show landlords that your property comes with the whole package, turning it into a mostly hands-off investment for them.

  • Invest in Different Markets: Selling to landlords can also widen the pool of areas you can invest in, since a strong rental neighborhood and a strong seller’s market are two different things. This gives you the chance to flip properties in lower-price areas, with less upfront capital. You also won’t need to shell out as much for high-end fixtures and fittings, since these won’t matter to a landlord like they would to an owner-occupier.

Landlords may not be your primary market, but they can account for a healthy secondary market when it comes to finding buyers for your flips. Keep these points in mind when targeting local buy and hold investors with your flip, and you could end up with a lifetime customer for your business.

Image Courtesy of Lisa Fotios

Categories
Flipping

Tips for Selling Your Flip Fast

Do you want to sell your flip as fast as possible?

Flipping has always been a popular investment strategy for those looking to earn some quick-and-dirty profit. You see a property that has great potential to be sold at a much higher price–after some improvements and renovations–so you quickly buy it, flip it, and sell it! And of course, the more properties you flip, the steadier your income becomes.

But how can you ensure that your flip will sell quickly? Each day that passes costs you money–there’s mortgage payments, utilities, taxes, and other expenses that you’d need to pay while the property is in your possession. How can you sell as fast as possible, to minimize the amount of time your capital is at risk?

Here are some tips to help you sell your flips fast:

1. Know Who’ll Buy Your Flip

Before anything else, you should first consider who your potential customers will be. Always keep this ideal buyer in mind, because all your efforts–from renovation to marketing–should be focused on appealing to this buyer. All their demographic details should be considered to rehab and market your flip effectively. What life stage are they at? What do they expect from a property? How can you evoke an emotional response to encourage the sale?

2. Make Your Flip Their Dream Home

Now that you’ve identified your target buyer, rehab the property according to their expectations. When they see the property, they should be impressed and immediately think, “This is it! This is what we’ve been looking for.” For example, people usually like significant upgrades in the kitchen, but be careful not to make your fixes too niche or “trendy”–buyers might not share your taste or style. They want to see their home, and not somebody else’s. So think about what your target market would want in their dream home, and deliver that.

3. Partner with an Expert Agent

This might just be the most important tip on this list. You need an expert real estate agent to ensure you sell your flip fast. They should have proven experience, especially in the specific area you’re selling in. A good agent can help you determine how to tailor a property to the needs of local buyers, and should be great at evoking an emotional response during property viewings. Once you’ve built the dream house, it’s your RE agent who will make that dream come alive in the mind of the buyer, so they form a crucial component of sealing the deal. 

4. Price It Competitively

Just like in most industries–pricing is everything. So make sure you price your flipped home at a competitive level, if you’re looking for a quick sale. Your agent should help you figure out the perfect price, though you can already get a good idea from researching the neighborhood yourself. How much did other flips sell for? How long did the property stay on the market?

5. Stage it–Show it Off!

It’s important to stage your flip in the most impressive way you can to help buyers visualize themselves living in the property. Even now, with virtual showings becoming more popular in the era of the new normal, it’s still just as important to stage the property well. But this doesn’t mean you should over-decorate the whole house. Instead, focus on bringing out the best features of the main rooms: the living room, master bedroom, dining room, and kitchen. Set the scene so that your target buyer can imagine their family in the space, making sure that the dream you’re selling is consistent with your audience’s needs and wants.

If you follow these tips, you should be able to generate a lot of interest in your properties amongst local buyers, allowing you not only to sell your flip fast, but put yourself in the best position to receive multiple competing offers, as well. And that’s exactly what every flipper wants to maximize profits and quickly move on to their next project.

Any other tips you’d like to share with your fellow flippers?

Flipping has always been a popular investment strategy for those looking to earn some quick-and-dirty profit. You see a property that has great potential to be sold at a much higher price–after some improvements and renovations–so you quickly buy it, flip it, and sell it! And of course, the more properties you flip, the steadier your income becomes.

But how can you ensure that your flip will sell quickly? Each day that passes costs you money–there’s mortgage payments, utilities, taxes, and other expenses that you’d need to pay while the property is in your possession. How can you sell as fast as possible, to minimize the amount of time your capital is at risk?

Here are some tips to help you sell your flips fast:

1. Know Who’ll Buy Your Flip

Before anything else, you should first consider who your potential customers will be. Always keep this ideal buyer in mind, because all your efforts–from renovation to marketing–should be focused on appealing to this buyer. All their demographic details should be considered to rehab and market your flip effectively. What life stage are they at? What do they expect from a property? How can you evoke an emotional response to encourage the sale?

2. Make Your Flip Their Dream Home

Now that you’ve identified your target buyer, rehab the property according to their expectations. When they see the property, they should be impressed and immediately think, “This is it! This is what we’ve been looking for.” For example, people usually like significant upgrades in the kitchen, but be careful not to make your fixes too niche or “trendy”–buyers might not share your taste or style. They want to see their home, and not somebody else’s. So think about what your target market would want in their dream home, and deliver that.

3. Partner with an Expert Agent

This might just be the most important tip on this list. You need an expert real estate agent to ensure you sell your flip fast. They should have proven experience, especially in the specific area you’re selling in. A good agent can help you determine how to tailor a property to the needs of local buyers, and should be great at evoking an emotional response during property viewings. Once you’ve built the dream house, it’s your RE agent who will make that dream come alive in the mind of the buyer, so they form a crucial component of sealing the deal. 

4. Price It Competitively

Just like in most industries–pricing is everything. So make sure you price your flipped home at a competitive level, if you’re looking for a quick sale. Your agent should help you figure out the perfect price, though you can already get a good idea from researching the neighborhood yourself. How much did other flips sell for? How long did the property stay on the market?

5. Stage it–Show it Off!

It’s important to stage your flip in the most impressive way you can to help buyers visualize themselves living in the property. Even now, with virtual showings becoming more popular in the era of the new normal, it’s still just as important to stage the property well. But this doesn’t mean you should over-decorate the whole house. Instead, focus on bringing out the best features of the main rooms: the living room, master bedroom, dining room, and kitchen. Set the scene so that your target buyer can imagine their family in the space, making sure that the dream you’re selling is consistent with your audience’s needs and wants.

If you follow these tips, you should be able to generate a lot of interest in your properties amongst local buyers, allowing you not only to sell your flip fast, but put yourself in the best position to receive multiple competing offers, as well. And that’s exactly what every flipper wants to maximize profits and quickly move on to their next project.

Any other tips you’d like to share with your fellow flippers?