6 Tips For Quick Turning (Flipping) A House
1. Know Your Numbers
What price will the house sell for when it is finished? A clear idea of the ARV (after repair value) is necessary to safely make an offer on a property. Do not guess that you’ll sell the home for $20,000 more than what you put into it. You don’t decide what a home is worth - the market does, so get advice if necessary. Then subtract from the ARV all possible costs you will have, including price, buying costs, repair costs, holding costs, and the costs of selling. Now subtract the profit you want, and you have the highest price you should pay. Start with an offer lower than this, of course.
2. Schedule Properly
Countless house-flipping projects have gone wrong due to falling behind schedule. For example, you think you can get the plumber in and out of the house in the first week, but it takes a month, so you can’t close the walls up, and everything else gets behind schedule. Meanwhile your spending $2,500 per month on holding costs like loan payments, utilities, property taxes and insurance. Be sure to check before you finalize the offer, to see how long things like windows, plumbing and dry-walling will take. Also, make completion dates a part of any contracts you sign with contractors.
3. First Things First
On one of those “fliping homes” programs on television the other night, a young couple was running $10,000 over budget on their first fixer-upper investment (and six weeks behind schedule). They ran out of money and put the house on the market with a low quality looking yard and stains visible on the front wall. Of course buyers would see these things first, making a bad impression. You can avoid this by starting with changes that are most important. Then if you run out of money or time, you’ve already done the things that will make the home sell.
4. Figure The ROI Of Improvements
The Return-on-investment(ROI) for each possible improvement should determine what you do to the home. You’ll be guessing at times, but the principle is that you do only those things which increase the value of the home substantially more than what they cost. Such high-ROI improvements vary by area and by type of home, but they typically include painting, carpeting, landscaping, and finishing unfinished space. With a small house, you might get new flowers and bushes, fresh paint, and all new carpeting for less than $7,000, and possibly raise the market value of the home by $14,000.
5. Know Your Buyers
A single story spanish style home in a neighborhood full of retired couples, won’t sell well to the younger crowd. Know what kinds of buyers are likely to want the home (and neighborhood) before you start. Then, after improving it with those buyers in mind, market it appropriately. You or your agent should identify and advertise the benefits that matter to your buyers, whether this includes “close to stores” or “country living.”
6. Price It Right
Selling fast means you save those holding costs. You may also have other projects waiting for that money. To sell fast, price it slightly below market value - and let buyers know it’s a deal. It may seem that if you sell for $3,000 under market, you’re losing $3,000, but you are possibly saving a couple thousand in the holding costs you’ll pay if it takes an extra six weeks to sell at a higher price. Also, if you are a serious investor, flipping a house fast means getting the money into the next project fast. Buy right, and use the other tips here, and there should be plenty of profit left in any case.
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