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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!

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Flipping

Flipper Insurance? Here’s What You Need to Know

A pair of carpenters need to work on house renovations
Photo by Annie Gray

By buying valuable properties at a low price point, you can set yourself up quite well. The better the deal, the better margin for your fix-and-flip projects—but there is always risk involved in the house flipping business. From carpenters dealing with heavy machinery to construction workers on ladders…

A flipping project can be a hotbed for injuries.

For example, over 30% of yearly ER visits in North America—or about 9 million visits—come from people falling off ladders. With danger constantly lurking on your worksite, you’re going to want some protection. And flippers need specific insurance that covers their type of work.

In this article, we will talk about the types of insurance you need when flipping houses.

What Kind of Insurance Covers House Flipping?

No one ever plans on things going wrong while flipping a house, but they do happen. That’s why it’s essential to have the right insurance in place. But regular insurance won’t cut it for house flipping, and homeowner insurance won’t cover it, either, because it’s considered a high-risk environment.

So how do you get good insurance coverage?

Well, you need to look into 3 types of insurance:

  • Dwelling Policy
  • Builder’s Risk Policy
  • General Liability Umbrella

Each insurance covers a specific area, which we will discuss in detail.

#1 – Dwelling Policy

A dwelling policy is an insurance that covers a vacant property under renovation from physical damage. Attached structures like garages and porches are also covered. Unlike homeowner’s insurance, a dwelling policy doesn’t include personal belongings, only the structure itself is insured.

With a dwelling policy, your property is protected against damage caused by:

  • Fire
  • Lightning strikes
  • Heavy winds
  • Hail
  • Explosions
  • Vandalism
  • Theft
  • Vehicular accidents

However, depending on your insurance plan, things like vandalism might not be covered. We will talk about the type of plans in a later section.

#2 – Builder’s Risk Policy

This type of insurance covers physical damage to the property during the construction process. Like the Dwelling policy, it will protect a home from the same sources of damage. Generally, the builder’s risk policy can be thought of as an add-on to the dwelling policy.

However, a builder’s risk policy includes additional coverage for the materials and tools needed to repair the property. With a builder’s risk policy, you can keep your building materials and tools safe from damage.

#3 – General Liability Umbrella

This insurance can cover you and your investors from liability for accidents and injuries caused during your home flipping project. For example, if a carpenter gets injured while working on your property and sues you for damages, the general liability umbrella can protect you against financial losses.

But keep in mind: The general liability umbrella only covers you, but not the workers and contractors you hired. This means that if they cause an injury while on-site, they won’t have insurance to protect them against liability.

The Different Types of Coverage

When you buy insurance, it comes in different levels of coverage to choose from. A basic package might have minimal coverage while higher levels of coverage can protect you more.

Generally, there are 2 types of coverages you need to consider:

  1. Basic coverage – This will cost less but will exclude protection from certain factors. For example, vandalism, theft, and water damage usually aren’t covered by a basic package.
  2. Special form coverage – This protects you from all sources of loss except for explicitly mentioned sources that are indicated in the contract.

Depending on your situation, you might need more than basic coverage. For example, if your property is in an area that experiences heavy snowfall—like Alta, UT, which experiences around 457” of snowfall annually—you should definitely get the special form coverage.

How Much Does Insurance Cost?

Unfortunately, there isn’t a clear-cut answer as insurance costs vary by region and other factors. Also, insurance prices have no direct link to property prices. Plus, the status of the location usually determines insurance. For instance, If an area is more prone to natural disasters, it will have higher insurance premiums.

Let’s take Detroit as an example. The area is susceptible to heavy rains and harsh winters, so insurance is more expensive in Detroit. The national average insurance price is $1,312 annually; meanwhile, Detroit’s averages are around $2,237 per year.

In short, depending on the location, insurance prices widely vary.

Protect Yourself From Liability While Flipping Houses

Flipping houses isn’t all sunshine and rainbows. Accidents can happen while rehabbing a property. If you’re not insured, you might be facing heavy losses due to lawsuits.

To avoid losing money—money better spent on your flipping project—to lawsuits and damages, get yourself insured. With a dwelling policy, builder’s risk policy, and general liability umbrella, you can protect yourself and your property from damage and losses.

Do you have any insurance tips for house flippers? Tell your story below!

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Flipping

Top 5 Youtube Channels to Learn About House Flipping

The Youtube Logo on a mobile phone

Getting better at house flipping can be an essential tool for becoming a successful flipper. Gathering info from books and other resources helps expand your knowledge in the flipping game. Plus, learning from experienced flippers can give you a huge leg up against competing flippers. 

But, you don’t have to limit yourself to books. These days, Youtube is a great learning tool. In fact, 7 in 10 Youtube users use the platform to learn. And it goes without saying, that you can gain a wealth of real estate tips from Youtube. 

To help you get an upper hand in the house flipping game, we’ve collected 5 of the best Youtube channels to learn from. 

5 Best House Flipping Youtubers

If you’re tired of reading books on real estate, well then Youtube is a great resource for getting the latest and greatest tricks in the house flipping business. But, you don’t want to just learn from some random Joe Schmo. You want to learn from someone with a wealth of experience. 

That being the case, we’ve sifted through Youtube’s content library to find the best house flipping channels. 

  1. Lex Levinrad 

Joining the platform in 2008, Lex Levinrad is a veteran of the Youtube landscape. Not only that, but he’s also a veteran of the flipping game. According to Lex, he’s flipped over 1000 houses throughout his flipping career. Currently, he has 17 thousand subscribers and has a total of over 2 million channel views. 

The Lex Levinrad channel will help fill gaps in your flipping know-how. For instance, his video on flipping a fire damaged property. In it, he gives tips about the pitfalls of buying a fire-damaged house and what repairs to focus on. 

With the Lex Levinrad channel, there’s always something new to learn about flipping houses.

  1. HouseBarons 

The HouseBarons channel is run by brothers Dave and Rich. They’re quite successful as Youtube creators considering their channel has garnered over 13 million views in its 10-year lifespan. Add to that, the HouseBarons gathered a healthy following of over 38 thousand subscribers. 

On the HouseBarons channel, you’ll get find a large vault of very specific tips and tricks. Take, for instance, their tutorial on fixing a faulty door. After all, creaking doors that open by themselves might be something you don’t want to show potential buyers during a property tour. 

All in all, the HouseBarons Youtube channel can be a great wellspring of knowledge. 

  1. Real Estate Investing Tips for Beginners

If you’re just beginning your journey in the house flipping business, the Real Estate Investing Tips for Beginners Youtube channels can be a great instructor. The channel has over 720 videos that cover a wide variety of topics for investing in real estate. It has just a bit over 50 thousand subscribers and uploads regularly. 

The channel has a series of videos dedicated to house flipping. There’s even a guide for how to start flipping with just $10 if you’re on a tight budget. From house flipping to wholesaling, you can learn a ton of real estate tips from this channel. 

  1. The Friendly Flipper

Learning from experienced flippers is a valuable experience that can’t be replaced. But some experts forget how to talk to beginners and can drown you in jargon. Thankfully, The Friendly Flipper channel makes this easy. With over 130 videos dedicated to house flipping, you’ll learn a ton and it’s all easy to digest content. 

The Friendly Flipper host a range of videos from interviews with fellow flippers to flipping progress vlogs. For instance, in his latest series of videos, you can follow the entire progress of a flip over the course of just 7 days.

When you subscribe to The Friendly Flipper, you’ll get a great guideline for flipping houses.

  1. BiggerPockets

Finally, BiggerPockets is one of the biggest channels on this list. In fact, it has nearly 900 thousand subscribers to date. And with over 2.3 thousand uploads, you’ll have a lot of content to digest. 

On the BiggerPockets Youtube channel, you’ll get the full breadth of what it takes to be successful in the real estate business. While the channel covers the entirety of the real estate market, it isn’t lacking when it comes to house flipping. For example, one of their most successful videos is a series that goes through the house flipping process from start to finish.

Between securing funding to looking for the right property, you can learn a lot from BiggerPockets. 

Expand Your House Flipping Knowledge with Youtube

There are a lot of avenues to explore when it comes to learning about house flipping. From reading a book to listening to experienced flippers recount their journey, you can pick up tips from almost anywhere. With this list, you can easily turn on a video to learn a little more every day.

Follow these 5 channels, and you’ll gain enough flipping knowledge to gain an edge over other flippers.  

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Flipping

9 Best Ways to Remodel Bathrooms for a Fix-and-Flip Project

Bathrooms are one of the most popular rooms in a home to renovate, and it’s clear why. People spend hours in their bathroom every week getting ready, cleaning it, and practicing basic hygiene. In fact, a study in England found the average adult will spend 416 days of their life in the bathroom. 

Given the importance of a good bathroom, it goes without saying that prospective buyers of your fix-and-flip home will scan bathrooms and make quick judgments on them. Well-maintained bathrooms with new fixtures and updated features can often seal the deal for residential properties.

Moreover, compared to kitchens, most properties you’ll come across will have more than one bathroom.

For instance, the City of Detroit is known for its affordable housing stock (you can snag great homes for as low as $40k). But look at how many Zillow listings in the city have at least three bathrooms:

Especially if you have multiple bathrooms like this in a property (like in multifamily buildings), you need to have a strategy in mind when approaching bathroom renovations. Remember, good outcomes are a result of good planning. Poorly planned bathroom remodeling projects can quickly turn into a financial nightmare—stalling the project’s completion and depleting its potential gains.

So today, we’ll show you 9 specific steps to use as you remodel your bathrooms. Use these for a flip that’ll sell in seconds—without going over your renovation budget.

1. Replace Cabinets? Just Reface Them

Ever heard of refacing kitchen cabinets? You can do the same thing to bathroom vanity cabinets. It’s easy, and it saves you a ton of money instead of replacing them with new ones.

Here are some general steps to go about it:

  1. Sand all exterior surfaces
  2. Make veneer cuts to cover the existing cabinet
  3. Paint the cabinet with contact cement to give it a milky glow
  4. Apply the veneer to the cabinet
  5. Trim the loose edges and add the molding
  6. Lastly, install doors and some drawers

Aside from refacing the cabinets, you can also save a couple of bucks by covering up dents and holes in the wallboard with wainscotting. It looks brand new without replacing anything.

2. Be Cheap, But Don’t Overdo It

You may be tempted to cut down costs as much as possible. And avoiding expensive features, like new bathtubs, showers, toilets, and sinks can save a lot of money.

That being said, you should steer clear of rock-bottom offerings that will turn off most home buyers. Everyone can tell if a bathroom is renovated with cheap materials. Plus, it’ll wear out sooner and actually cost more to maintain in the long run, which is something rental investors, in particular, will be wary of. 

Instead, find the sweet spot of quality and functionality without steep price points.

Check big box stores like Home Depot for bathroom remodeling bargains. They’ll have everything from faucets to large mirrors, so you’ll have a wide variety of products (and prices!) to choose from. If you go with higher quality brands, you’ll also get hardware with lifetime warranties for your faucets and showerheads, which is a nice perk to pass along to potential buyers.

3. Keep the Throne Glistening

The toilet is the main feature of any bathroom. Every potential buyer and investor will expect it to be clean, sparkling, and fully functional. Any amount of rust or grime could turn them off from considering the property at all.

One pro tip we can give you is to replace the toilet seat. We know, it’s really simple. But this crucial DIY can change the entire look of the toilet, making it look brand new without spending tons of money on replacing the entire bowl. 

It’s inexpensive and does the job of impressing prospective buyers.

4. Save with Laminate Flooring

If you’ve been in the industry for a while, you probably know that laminated floors have a bad reputation for being boring and dull. However, for a flip-and-fix project, laminated floors for bathrooms check all the boxes.

Here are the advantages of choosing laminated flooring:

  • It’s inexpensive and easy to source.
  • It holds up against moisture and stains.
  • It’s pretty easy to clean and maintain.
  • It’s extremely durable.

You don’t have to use laminated flooring for the entire property, as that can lower the value of the home. But, installing laminate in your bathrooms is a great, affordable decision.

5. Refresh the Bathtub

Does the house come with a bathtub? Great!

Is it in good condition? If not, there are ways to fix it.

With good refinishing, you can turn any old tub into a new one. Try using special paint to cover up cosmetic blemishes. If the task is too much, you can also contact a professional bathtub refinishing company, like Permaglaze or Miracle Method, to do the work for you.

Refinishing will always be cheaper than replacing the tub. The finished result looks like new, without the “new” price tag, and that keeps both you and potential buyers happy.

6. The Devil’s in the Details 

Ensure that you repair or replace essential fixtures like door hinges, doorknobs, towel racks, showerheads, all the faucets, and even the toilet paper holders. These are all inexpensive and do wonders when it comes to making a bathroom look more high-end.

Another pro tip is to avoid polished chrome or polished brass finishes. The style is outdated and can look quite cheap. Instead, try going for brushed nickel, stainless steel, or matte black to create a more modern look.

It’s even better if you can match the fixtures for a consistent “branding” or design. Spending a few extra bucks for matching fixtures will look more impressive to prospective buyers and investors.

7. Clean Out the Caulking and Grout

Caulking and grout—especially in bathrooms—can look dirty over time. So, ensure that you clean or replace them to brighten up the bathroom and give it a refreshed look. You can do it yourself with a toothbrush or hire professional cleaners to scrub the corners throughout. 

If there are any signs of mold or mildew in the shower, you can also create a DIY bleach solution to remove it. Here’s how to make it yourself: 

  • Mix 1 part bleach with 10 parts water.
  • Put the solution in a spray bottle.
  • Use the spray bottle, soak the affected tiling.
  • Spray more on visible areas like light-colored tile grout or caulk.
  • Be patient and wait for at least five minutes to let the solution sink in.

Are you pressed for time? You can also contact professional cleaning services in your area to clean your bathroom for you. It’ll cost you extra money, but it certainly saves you a lot of work.

8. Don’t Fix Anything That Isn’t Broken

For a fix-and-flip project, it’s always better to keep everything that’s still functional.

If the toilet isn’t dripping, don’t replace it. If the bathtub isn’t leaking, don’t change your entire plumbing system. Is there any mildew or moldy spots? Clean them up and open the windows to ventilate the place. 

Basically, don’t fix anything that isn’t broken. Every upgrade should be necessary and add value to the property. If you spend too much, that will eat into your profits when you go to flip it. 

Moreover, moving or replacing the plumbing system is crazy expensive. Just use HomeAdvisor’s calculator to see how everything adds up. Given that you want to protect your flipping profit at all costs, don’t replace or move the plumbing system unless absolutely necessary.

9. Add Extra Lighting Fixtures 

With everything spick and span, ensure that you put enough lights in the bathroom to show off its design. Flickering or struggling lights can turn off prospective buyers and investors. After all, no one wants a dimly lit bathroom. 

Make sure you also replace the light bulbs with a higher wattage, especially if your budget is pretty tight. Add ceiling lighting and some vanity lights if you can afford it, too. This will brighten the space and make it feel bigger.

You’ll be amazed at how a simple light improvement brightens up a small space.

Conclusion

Now you’re ready to renovate that bathroom and improve your profits on your next fixer-upper. By following the tips in this article, you can boost your profits by impressing prospective buyers and investors with a great bathroom. Set the tone for the rest of the property with a clean, freshly renovated bathroom. 

Remember to reface instead of replacing, never sacrifice quality for lower cost, avoid over-renovating, and pay attention to the smallest of details. All of these tips help you bring bathrooms up to par without eating into your budget

Anything else we’ve missed? Comment your personal tip down below to help other flippers!

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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