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Flipping

5 Easy Ways Flippers Can Spruce Up the Lawn Before Sale

Source: Curbed

Are you getting ready to flip a house? If so, it’s important to make sure the outside looks as good as the inside.

After all, no one wants it to look like a neglected eyesore or it will scare away any potential buyers. And yet, you have to strike a perfect balance because you don’t want to spend too much time or money on it either.

In the house flipping industry, time is money—the longer you spend remodeling the property, the less profit you earn. Landscaping tends to eat up a ton of time and effort, which means that if you’re investing in long-term lawn care, you’re not flipping fast enough.

On average, flippers spend between 5 and 10% of their budget on landscaping. This may not seem like much but you’d be surprised at how much value this brings. In fact, studies have shown that sprucing up the lawn can increase the home’s value by as much as 20%.

That’s a lot of additional profit for each flip. But this isn’t the only reason why you should invest in landscaping. Keep in mind that construction work to renovate other parts of the property will likely mess up the yard, so much so that you might need to redo the entire lawn.

So, let’s take a closer look at how you can effectively spruce up the lawn without going over budget.

How to Spruce Up the Lawn Without Breaking the Bank

No flipper wants to dedicate a huge swath of their budget to landscaping. So, here are a few cost-effective tips for you to improve the lawn without going over budget. The goal is to ensure that the home will attract potential buyers—notably, the target market that you want to reach.

1. Remember Your Audience

Before going crazy with your landscaping to-do list… first, consider what your target buyers will want. For example, if you’re hoping to sell to an older group of people, then perhaps it would be better to not have a lawn at all since they may not want to regularly maintain it. Young professionals, however, would likely opt for a patio or outdoor deck to entertain their friends, rather than a high-maintenance yard.

But if you’re targeting families, then feel free to go level up the landscaping. Chances are, these buyers are prioritizing wide open spaces for their kids and pets to play in. In fact, not having a poorly-maintained lawn may turn them off from seriously considering your property.

Apart from your target buyers, also consider what real estate class the neighborhood, tenant pool, and property belong to. For instance, it won’t make sense to create a beautifully-landscaped lawn for a Class C home since an expensive feature to maintain would be the last thing its tenants want.

2. Make the Grass Greener

A well-manicured lawn and tidy garden can go a long way in boosting your property’s curb appeal. The grass, in particular, has the most visual impact on guests when they first see the house.

Simply adding either fertilizer or grass seeds can go a long way. In fact, do this the minute you start on the flipping project. That way, the grass will already be fuller, healthier, and much greener by the time you’re finished and ready to sell.

As tempting as it is to constantly mow the lawn, it actually puts stress on the grass, especially if you trim off more than 20% at once. So check the cutting height of your lawn mower before turning it on and going to town with it, and ensure that you’re not mowing the grass too often.

This shouldn’t stop you from regularly pulling out the weeds, though. After all, who wants to see an overgrown lawn?

3. Edge the Lawn

If you want the lawn to appear tidier to potential home buyers, use an edger to trim the grass along its perimeter. Doing this creates a crisp and neat border that will make your property look cleaner and more professional, undoubtedly increasing its curb value.

Edging can also highlight landscaping design elements, which is important if you want to draw a buyer’s attention to a particular area of the lawn. It also prevents weeds and turf grass from growing into flower beds, so you no longer have to worry about the aesthetic appeal of your blooms.

4. Don’t Forget the Grass Clippings

For many, grass clippings are sent straight to the garbage can. But for flippers, they’re heaven-sent. Rather than bagging them after mowing the lawn, leave them where they are. Since they’re small and comprised of mostly water, it won’t take them long to break down and fertilize your garden.

However, make sure to clean up the grass clippings from your driveway, the sidewalk, and the other hard surfaces surrounding your lawn.

5. Invest in Lawn Repair Mix

You can easily fix bare patches on the lawn with a lawn repair mix, which typically consists of compost, fertilizer, and grass seedlings.

For better results, remove the dead grass and loosen the soil until at least three inches below the ground. This will give the lawn repair mix enough space to grow. Take care not to overwater this spot to prevent the seeds from scattering.

Sprucing Up the Lawn Won’t Break Your Budget

As always, the goal is to create a lawn that fits the criteria for selling that particular property to a particular target market. You don’t want to spend too much time, effort, and energy on a project that won’t pay off. In all flips, the faster you sell it, the more money you’ll get to keep, so make sure that your remodeled lawn will help you earn the profits you want.

In this article, we proved that landscaping projects aren’t as scary, expensive, or as time-consuming as you think they might be. With just a few easy fixes, you can increase your flipping profits without spending too much time and effort beautifying someone else’s lawn.

For more house-flipping tips, reach out to our team of experts at Logical Property Management. We’ve been serving the Metro Detroit real estate market for more than two decades now, and have everything you need to succeed in the area.

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Flipping

House Flipping Business Plans: How To Create One (with Examples!)

A rehabilitated home in North End, Detroit
Source: Detour Detroit

Flipping real estate makes for a great reality TV show, but it can also be a lucrative investment strategy if you know what you’re doing. What they rarely show on screen, however, is the importance of having a business plan for flipping homes—one that we’ll provide for you in this article.

Read on for our house-flipping business plan template!

The Ultimate Business Plan Template: Planning for Success

The goal is to build a solid foundation that serves as your living roadmap for your house-flipping empire. Only when you have the goals and action steps in place can you put yourself toward investment success, attracting real estate investors, financial partners, and home buyers to work with your company.

Here are the 8 steps you need for a thorough house flipping business plan:

Step 1: Mission & Vision Statement

Start by creating your mission and vision statement. Change the following placeholders:

[Company Name] [what you do] [what you offer] to [who your customers are] with [your benefits, e.g., faster, more reliable, lower cost].

Here’s an example of a great house flipping business plan:

Flipping Fortunes finds, fixes, and sells fixer-upper homes to investors and homebuyers in the City of Detroit. Unlike other companies, we are Detroit locals and partners of Logical Property Management company that has been operating in the area for more than two decades.

Step 2: Products & Services

Next, list down all your company’s services and support each title with a short description. Here’s what it may look like for Flipping Fortunes, the fake house flipping business we used earlier:

Flipping Fortunes will provide these services for investors and home buyers in Metro Detroit:

  • Complete property restoration or renovation: Our team will scout, inspect, budget, and manage property flipping projects from start to finish. Home buyers and property investors can then purchase affordable, quality homes at a fraction of the cost of a newly built home.
  • Professional assistance for house flipping projects: Our team will help real estate flippers and DIY home flippers with everything they need to complete their flipping projects, including connections to professional inspectors, licensed contractors, and experienced real estate agents.

The more details you can add, the better. After all, interested real estate investors and financial partners will want to know everything your company can provide for them before engaging and signing the dotted line with you.

Step 3: Management Team

In this section, you want to explain more about the “who” of your business. Is your team composed of knowledgeable and experienced real estate experts who’ll live up to your company’s promise?

Here’s a quick example:

  • John Doe, CEO: Licensed real estate broker and property manager for the past two decades. Doe began as a real estate wholesaler before spending most of his career working with several agencies and property management companies. In all of his ventures, he always specialized in house flipping projects, having now flipped more than 250 projects.

Be sure to include each individual’s expertise, experience, knowledge, and everything else that can prove their capability and solidify their role. The higher you can lift your team members, the more trust you’ll gain as a company.

Step 4: Success Factors

Next up, what needs or specific niche are you addressing in the particular real estate market? These things are crucial for getting financial partners to join your venture, convincing them ‌you have a great business idea on hand.

Here’s an example of what a success factor could be:

Flipping Fortunes addresses the growing niche within the Metro Detroit real estate market. Our team opens opportunities for valuable fix-and-flop projects, making it easy for investors and home buyers to get their slice of the confusing yet high-performing hotspots in the tri-county area.

Pro Tip: You can also conduct a SWOT analysis to get a clearer picture of your strengths and weaknesses as a company.

Step 5: Target Market

As with any business, your house flipping company’s success depends on the supply and demand, as well as the cost of labor and value appreciation of the renovations. You don’t want to offer your services to a place that doesn’t need them.

Instead, your goal is to identify where you can “sell” most of your flipping services to a large market for many years to come.

Step 6: Business Entity

To operate your business legally, ‌choose a business entity and register for your business in the state you’ll operate in. There are many business entity types to choose from, but we recommend that go with one that has limited liability protection, like an LLC or corporation.

Liability protection is crucial for a house flipping business, as there are many things that can go wrong. For example, someone can sue your company because of a property you’ve flipped—where you’ll want to ensure that your personal assets remain protected.

Pro Tip: Consult with a business attorney to learn your options and weigh them accordingly.

Step 7: EIN, Insurance, Permits, & Licenses

It’s also important to ensure that you have the required documents to run your business. Oftentimes, banks and private investors will want to see this anyway. After registering your business, go through the following processes before officially starting operations:

  • Register for an employer identification number (EIN), which you’ll use for tax purposes, applying for business loans, or apply for business bank accounts and credit cards.
  • Look into business insurance options, especially if you’re going to hire employees. You’ll need workers’ compensation, unemployment, and disability insurance. Moreover, research about general liability and commercial property insurance to protect your assets.
  • Obtain the property business licenses and permits for your state and scope of work. You might need to get several permits to work in the construction business. You can also check with your local chamber and business attorney to ensure that you have the complete paperwork.

Step 8: Financial Summary

Lastly, ensure that your flipping business will generate high returns—both for you and for your investors. Here are a few ways you can get financing:

  • Through friends and family loans: Also called Patient Capital, this is when you fund your projects with personal loans from family members, friends, or partners. It’s low stakes and an easier route than traditional bank loans.
  • Tapping into your 401(k): If you don’t plan on retiring ‌soon, you can take a loan out of your 401(k)—either from the classic 401(k) loan or a ROBS loan.
  • Combining financing options: You can also find success in using several financing options to purchase and renovate your properties.

Start Flipping & Start Generating Profits

As your company grows, the projects will naturally increase in complexity and number as well. That is why having a business plan is important, especially if you want to attract investors. Your investors should see that you do your due diligence before putting any money on the line.

Have any more questions? Drop them in the comment below!

Categories
Flipping

Why You Should Always Target Distressed Properties to Flip (And Where to Find Them)

Creepy old mansions may be a nightmare for most people, but they’re hidden gems for a house flipper. These oldie-but-goodie properties are examples of how distressed properties have great value within them, giving real estate investors opportunities to gain massive flipping profits.

Why are there distressed properties in the first place?

Well, there are a lot of reasons why a home could become neglected. Here are a few examples:

  • The home could’ve been a foreclosed home left to someone as inheritance, but it’s located far from where the person currently lives. The home left behind will often go into probate for a year, during which time the new owner cannot touch it. That means it’ll sit for a year, quickly deteriorating.
  • The home could’ve gone through a natural disaster like a flood or tornado, and the owner doesn’t have the funds to repair it. It’ll also sit there rotting away.
  • The home could’ve been a rental that a tenant trashed and the landlord can’t take it anymore—not bothering to fix the home up again.
  • The home could’ve been owned by a hoarder with low income. They pay taxes, sure, but they don’t have the money, skill, or energy to keep the house in good condition.

Any of these situations leave many homes neglected and, eventually, distressed. However, while these homes are someone’s problem, they’re certainly your investment opportunity.

Here are a few reasons you should buy distressed properties, and how you can find these lucrative deals.

The Flipping Opportunity with Distressed Properties

To understand how the concept works, we need to first discuss how a home becomes a distressed property. So, here’s what usually happens:

  1. Owner Hardship and/or Neglect: Owner of a property loses their job, becomes ill or perhaps relocates. They may also inherit the property.
  2. Property Deteriorates: The issues above lead to the property falling into disrepair. At a certain point, potential buyers either don’t want to take on the repairs or can’t get a standard mortgage on it due to the poor condition.
  3. Cash Opportunity: At some point the homeowner will try to sell the property. Or maybe a motivated flipper can convince them they should sell. Either way, they will have to sell at a discount due to the lack of market demand for the property when it’s in poor condition. 

Situations like these give you opportunities to buy properties at a low price. These distressed properties are ideal for flipping because they’re rundown homes with tons of hidden value. Yes, they’re cheap because they’re in poor condition, but the lack of market demand will drive the market value even lower than the cost of repairs. 

The Risks and Benefits of Flipping Distressed Properties

Now, while the benefits of flipping distressed properties sound exciting, there are certain risks you’ll need to consider before committing to one. Here’s a chart to help you see the full picture:

The benefits are great, but the risks are inevitable. By anticipating the potential issues that sometimes arise with distressed properties, you’ll be ready to handle high-risk, high-reward fix-and-flip projects without a hitch.

Ways to Find Distressed Properties

You won’t find “distressed property” a common label in the real estate industry. Instead, you’ll need to think more strategically about how to find situations that will have motivated sellers. 

Thankfully, there are several ways to seek out distressed properties. Here are some of them:

  • Drive For Dollars: Select a neighborhood and look for homes with obvious signs of neglect. These can be signs like multiple notices on the front door, peeling and faded paint, an unkempt yard, broken windows, or uncollected mail.
  • Access the Multiple Listing Service (MLS): If you can find a way to access the MLS (say, if you have a real estate license or a friend who can help you), you can find distressed properties with remarks like,  “handyman special” or “fixer upper”. The longer the property stays in the MLS, the higher the motivation of the seller.
  • Find Foreclosed Properties (REOs): Peruse REO and bank-owned properties to find good opportunities. Lenders and banks aren’t in the business of keeping properties, and want to get rid of these non-performing assets as soon as possible. They will likely sell the homes to you at a discount.
  • Identify Homes with Delinquent Mortgage Payments: You can find public records of delinquent mortgages at your local courthouses. Individuals who can’t pay their mortgage are likely willing to sell their home to avoid foreclosure. 

You can also try to find motivated sellers with delinquent property taxes, as they’re likely behind on mortgage payments as well.

  • Consider Probate Options: You can visit the probate court to find properties left behind by situations such as divorce or death in the family. In some cases, the family left behind might not want the home. That said, keep in mind that you’ll need a special process to make an offer, since the property will be sold through an executor or attorney.
  • Get in Touch with Out-Of-State (OOS) Owners: Whatever the reason is for them moving to another state, some homeowners struggle to maintain the properties they can’t visit often. The result is distressed properties with highly motivated sellers. You can identify these people through direct mail or networking.
  • Check City Records for Code Enforcement Tickets: A property getting numerous tickets for neglect is a sign of an owner not taking care of their property and may be interested in selling.

Conclusion

Distressed properties are the perfect choice for house flippers since your goal is to acquire undervalued properties with the highest flipping profit. By buying valuable properties at a low price point, you’ll set yourself up to gain a large margin for a profitable fix-and-flip project.

What is your experience with buying distressed properties? Do you have any tips on successfully flipping them for a high profit?

Image courtesy of Malte Luk

Categories
Flipping

Top 5 Mistakes Novice Flippers Overlook (And How to Overcome Them!)

Reality TV shows may paint a picture of how easy it is to flip a property, but the actual reality is much more complicated than that. Unfortunately, beginner real estate investors often jump into the business without knowing anything about real estate and how it works!

In a nutshell, house flipping is buying a distressed property that you repair and sell for a profit. It’s one of the best ways to earn money from real estate, whether you do it full-time or only as a side hustle. In fact, flippers can make up to $25,000 profit on a typical house in the City of Detroit (provided, of course, that you follow the right advice). 

But like any business, house flipping takes knowledge, planning, and hard work to be successful. Without the proper guidance, you’ll only lose your hard-earned cash. 

So, here are five common mistakes that novices overlook and how you can avoid them altogether.

#1 No Market Knowledge

There’s more to house flipping than what you may know. One of the biggest mistakes new flippers make is buying a property that falls within their budget but is unfortunately located in an undesirable market. As a result, they end up stuck with a home they don’t need, with all their savings tied to an undesirable property.

Solution: Work with an experienced, local real estate agent who knows the real estate market well and can show you the ropes. Experienced agents will know things such as current market prices, what buyers are looking for, and the latest trends in the neighborhood. Then, continue learning by talking to other investors and following real estate investment blogs (like this one!).

#2 Investing Too Much Time and Money

The whole point of house flipping is to earn a good return on investment. But that is impossible if you spend too much money upfront. Moreover, time is also of great essence in the flipping business. On average, it shouldn’t take you longer than 1-2 months to sell it. The longer a property stays on the market, the more you have to pay taxes and maintenance. This increases your capital expenditure and squashes your potential flipping profit.

Solution: Follow the industry’s 70% Rule, which says you should only pay a maximum of 70% property value minus the repairs. This rule is significant for new investors who don’t have extra money to cover a project that goes sour.

For example, let’s say the property value is $200,000 after $10,000 of repairs. In this situation, you should spend no more than $133,000 to purchase the home ($200,000 – $10,000 x .70 = $133,000). If you spend too much money, you won’t be able to sell it for a significant profit.

On top of this, ensure that you work with a professional contractor before you purchase the property. They can inspect the home for you and provide an accurate repair cost for your budget.

#3 Overestimating Your Skill and Knowledge

Are you tempted to save money and repair the distressed property yourself? Keep in mind that so many things can go wrong if you don’t have the necessary knowledge and experience. It only takes one bad swing of the hammer to do irreversible damages to the home!

Solution: Start slow and look for homes that require minimal repairs (remember the 70% rule). You can gradually take up more complicated projects as you increase your knowledge and experience. Alternatively, work with a licensed contractor to flip the home for you so you won’t have to update the wiring and plumbing on a 60-year-old house.

#4 Miscalculating Cost of Repair

This is the most common mistake! 

One thing that most of the flipping & improvement shows get right is the “unexpected repair”. The demo crew opens a wall that exposes dry rot, termites, a major plumbing issue, etc. 

Miscalculating the cost of repairs can make your expected profits disappear. 

Solution: Look for projects that don’t require much work and talk to a trusted contractor to help you bring the home up to suitable standards. Also, build in 10-20% Cost Overrun in your repair budget. Don’t go overboard!

#5 Overvaluing the House

Finally, one of the classic rookie mistakes is estimating your sales price at the highest price possible. While this does happen, and it’s great when it does, you’re better off being a bit more conservative on your estimated sales price. 

Solution: Consult your real estate agent to land on a realistic price based on market analysis and careful consideration of the competition.  

Conclusion 

Home flipping is still a lucrative gig, provided that you are willing to invest the time and effort. While the concept is as simple as selling for a profit as fast as you can, there are so many pitfalls that can derail your efforts and put you in a financially difficult spot. 

Instead, learn from the mistakes of others! Avoid the top five mistakes novice flippers make to become successful flippers without burning cash.

Need more help in flipping houses? Feel free to get in touch. I’m more than willing to help you in your journey to become a successful house flipper.

Image courtesy of Sebastian Herrmann

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