Do You Have What it Takes to “Fix and Flip”?

before-after1

 

In the last few years, there have been many television programs that are about investors buying residential properties, rehabbing them and then selling them for a profit. The popularity of these shows has given many people the idea that they can easily buy, rehab and sell and make a quick dollar. While many people are successful, the reality is that it isn’t quite as easy as what we have seen on TV. There are many things that a “flipper” needs to think about before getting into the game. One must not only understand the process of taking a distressed property to its’ former glory, but also understand the local real estate market trends. I have found that the successful individuals or groups have a knack for knowing the construction side as well as the real estate side of these projects.

Starting with understanding the market for your potential flip property is important. For someone that is just a beginner in this kind of project, they need to know the potential value of a property and how much they will have to budget to get it to a point where they will make a good margin. Just because the property price looks appealing doesn’t always mean it is a good flip candidate. Here are some things that need to be considered when purchasing a property for flipping:

-Location. The old adage, “Location, Location, Location” holds true with flip properties. Although you may not be able to find that “diamond in the rough” next to a country club, you still need to be aware of the surroundings. Are the surrounding homes in good repair? Is the property next to a railroad, airport or busy street? Are there other issues that may affect value due to the location? If so, you may think twice about buying. It could affect your eventual sales price and also how long you have to hold the property.

-Market trends. Are the homes in the area going up in value? Is your area more seasonal for real estate sales? Remember, the data that you may look at for “comps” is historical data usually 1-6 months old and may not be a reflection of what is really happening in the current market. Make sure you analyze the data and try to get a good feeling of where the current market for your property is going. If you see listings selling quickly and multiple offers happening, then you will probably be in a good situation depending on how long your rehab takes. Most flippers will put a sign in the property right after they start the project and will create an interest list. If you are in a seasonal area, remember that the market will slow at certain times of year and the weather may be a factor in completing your job. Take it into consideration when buying a property in the late fall.

-Property features. Some features are great selling points and others aren’t. Some features you can easily change and some features can’t be changed. Some interior walls might be able to be moved to make a better floor plan but yard size can’t be changed. Also, some changes can be very expensive and time consuming and can cut into your margin.

Understanding the construction process is extremely important as well. Estimating costs, budgeting and knowing the order in which to complete the project are aspects of the construction side that could make or break your project. Here are some things to consider:

-Inspections. Have a thorough inspection prior to closing the deal. Remember that many inspections are non-intrusive and that there may be some hidden issues. A good home inspection should see indicators of hidden issues.

-Task list. Put together a list of things that absolutely need to be done and a second list of items that can add value but don’t necessarily need to be done. Examples of things that add value and are relatively cheap are things like crown molding and wainscoting.

-Estimate costs and put together a budget. This should be done prior to closing the deal as well. You need to figure your costs so you can determine possible margin and if it is worth taking on the project. I also recommend that buyer (especially inexperienced flippers) add about 15% to their estimate and put it in the budget for unforeseen issues. Also, many buyers forget to include possible permits, taxes and their holding costs in their budget. Always overestimate costs and be very conservative on possible sales price.

-Order of work. There is an order that should be followed to make the project go smooth and have the property look ready to sell when the last touch up is done. There is not necessarily a right or wrong way, but here is a suggestion of how it should be done (after initial inspections and task list is created):

-permits

-rough outside landscaping (grass doesn’t get green in a few days unless it is sod)

-trash out and any demolition

-fix roofing and foundation issues

-exterior doors and windows

-fix/upgrade plumbing and HVAC issues

-repair/replace sheetrock, tape and texture

-paint

-replace fixtures, appliances and flooring

-finishing interior touches

-finishing exterior touches

-finishing landscape touches

 

Taking on, and successfully selling a flip property can be very rewarding but is a lot of work. Make sure you understand what you are getting into before jumping in. Surround yourself with good people you can work or consult with, including good contractors and real estate professionals. Who knows, maybe you’ll have the next “fix and flip” TV show.

Give me a call if you have more questions or need advice about real estate investments. Garth Evans, 916 408-2222

Before and after picture from daytonhomeimprovement.com

3 Common Selling Pitfalls

Screen Shot 2017-08-08 at 2.42.12 PMThinking about putting your home on the market? Be sure to check out my thoughts on 3 of the most common mistakes sellers make, featured in the Lincoln View.

If you’re looking for an agent with experience and expertise, give me a call!

6 Tips to Prep Your Property to Sell

When people come to me about listing their property, one of the first things they ask is “how do I get my house ready to show?”. It may seem like common sense, but how the home shows and what a seller does to prepare it can make a huge difference on not only being able to sell, but also getting a price you are happy with.

 

Here are a few basic tips to consider when getting ready to put your home on the market:

 

  1. De-Personalize

When selling a house, you want to make sure that the people looking at it can picture themselves living there. Removing some personal items such as family photos, and clearing out things from around the house and counter tops like cosmetics, hair products or small appliances can go a long way in helping the buyers visualize the home as a “blank slate”.

  1. De- Clutter

Take this chance to lighten your moving load! Donating items taking up extra space in the closet and getting rid of unnecessary clutter makes your space appear larger and more desirable. Clear off any extra clutter on counters, magnets on fridges and books off of nightstands. You may consider renting a storage unit, and look at it as an opportunity to get a head start on your packing.

  1. Organize

Along the same vein, taking a chance to organize areas like closets and shelves makes a huge difference in how your home appears. This can be as simple as taking time to make sure your home entertainment center is free of excess wires, or making sure everything has a place in the closet. Containers or baskets make everything look more orderly and could make the move easier.

 

  1. Repair

It might not make sense to put too much money into a home you plan on selling, but a few cosmetic tweaks can have a big impact on how it shows. Are there any unsightly holes or annoying leaky faucets? Some buyers might be put off by simple things, so small things like painting any bright accent walls a nice neutral color or making sure obvious things are in good repair can influence how the listing is viewed.

 

  1. Clean, Clean, Clean

One of the biggest “make or break” moments is when a buyer looks at a home that is clean or not. If a potential purchaser walks into an area and it’s visibly dirty or smells, chances are they aren’t going to be too comfortable taking much of a look around. Making sure carpets are vacuumed, things are dusted and wiped down and there are no unpleasant fragrances is something that absolutely must be done when trying to sell a house. Areas like kitchens and bathrooms should be cleaned frequently when showings are happening. A deep cleaning before your home hits the market is always a good idea.

 

  1. Amp Up the Curb-Appeal

Almost all buyers like to take the chance to do a drive-by before they make an appointment to see a house so they can get a feel for the house and the neighborhood. Make sure to keep the lawn mowed, trim up any shrubs and maybe plant a few flowers for some color. The front of your house is the first impression, so make sure it’s a good one!

 

Listing your house, especially for the first time, can be a stressful experience filled with a lot of questions. However, choosing an agent with experience and expertise makes all the difference. Having sold homes for over 15 years in Lincoln, I know how to navigate even the toughest deals, ensuring you get top dollar when you decide to sell. Give me a call if you’re looking for someone that can get the job done!