First Flip: Am I missing something?

16 Replies

I will be diving my first Flip here in Texas ( West of Houston in Katy to be exact) at the end of this month. I have formed a partnership with a good friend who has his own construction company and manpower. My role is mainly acquisitions, marketing, sales, business development etc. My questions is, of the list below, am I missing something that I should consider or definitely have prior to beginning this flip?

  • 1.Vacant Dwelling Policy $4240 for the year. (Prorated back to me when I sell the home)
  • 2.Flood Insurance $425 for the year. (Also prorated back once I sell the home)
  • 3.Plan on using a listing website I.E. Listing Spark , Realmart etc.
  • 4.Working on the logo and other marketing strategies so that we can put our company sign in the front yard

There has to be more than the above. The construction aspect, permits, HOA approval of our design, and material is taken care of by my partner but any suggestions related to construction are also welcome!

I’m a bit nervous but in a great way!! I plan to post pics as things begin and would like to start a post where I update the status of the flip every week or so.

Thanks to everyone who can poke holes or chime in on this!!!

1. get builders risk insurance for a flip- better coverage

2. flood- ok, try to use the same policy as the seller if a claim was paid on it already

3. ok, you are better off getting your own RE license though

4. need an operating agreement, verify his GL Ins coverage, need written detailed scope of work

BIG TIP- EVERYTHING NEEDS TO BE IN WRITING BETWEEN PARTNERS.... NO EXCEPTIONS!

@David Olson Have you factored in your holding costs during rehab and while the property sits on the market.Utility cost,prorated tax and HOA dues and finance charges for any loan etc Good luck with your flip.

@Danny Webber thanks for the input!! 

1. I will definitely look into builders risk insurance. With builders risk, I don't believe you get your prorated funds back upon selling the house do you? I could be wrong.

2. Noted and will do!

3. I am currently taking online courses for my Real Estate License so I can in the future eliminate the listing websites.

4. Also will do! We did have a written partnership agreement when we filed. I had a lawyer review that and all is good on that front. 

@Ayo O. Current home owners are paying roughly $270 for electric, $35 for water, and $35 for gas. Electric is so high because the house flooded during Harvey therefor the sheet rock and insulation is removed and has been removed since Harvey. We WILL be getting a mold remediation certificate before installing new insulation and sheet rock.

I’d definitely go with the builders risk policy. I purchase it quarterly for each property so that I’m not committed to an entire year upfront. Costs about $375 per quarter for me.

Keep in constant communication with the HOA as they can hold up a project based on rules for contractor access times, exterior paint color, driveways, fencing, etc. They can also hold you responsible for any changes made by previous owner that were against HOA rules and that can get expensive. Ask early and plan for it.

Welcome to the learning curve! My advice is simple, know YOUR market.. I never buy a home , then find out the market value...  since your buddy is in construction that's a huge plus. i'm guessing your not a Realtor so go find a good one. I married mine. LOL

Seriously, I wish you the best.. 

Can you normally get a builder’s risk policy through your regular agent (e.g. State Farm, Traveler’s, etc)? Or are there limited companies that will offer those policies? And if the latter, is there a list of the better companies on the site or elsewhere?

David, What you"need" greatly depends on what you are going to do after you sell the property.  

What do you do for a living now?

Are you going to flip more houses? If so, how many are you aiming for per year?

Are you planning to parlay into different assets?

Are you planning to build a branded, recognizable company for property acquisition purposes?

@David Olson Vacant property policy is not the correct policy if you will be renovating.  Vacant policies do not want any renovation or renters on the premises.

There are other programs out there that are month to month and can cover Builders Risk and Vacant exposures at the same time.  I'll PM you the contact.

@Jodi R. @Darren Lenick @Wayne Brooks thanks for the advice! I have requested a builders risk policy quote from our insurance agent. Waiting for his reply which should be sometime today.

@Nick Button I am a PM in the oil and gas industry and I do plan to flip more houses than this one. Lofty goal but 2 a month would be amazing. For now I'll sink into this one home first. Goal is to flip so that I can scale my rental portfolio quicker. Which currently holds zero rentals but that is my goal as of now. 

@Jason Bott Many thanks for the PM!!

@Account Closed you are correct and I might have used the word market out of context. The marketing is something that will be ever evolving but I agree a great job will market itself. 

Hi David,

1. Insurance you can pay month to month.  I know Allstate does that.

2. Whatever your budget is after you crunch your rehab budget.  Add 10% to it.  Something always comes up.

Good Luck and kill it.

Originally posted by @Danny Webber :

1. get builders risk insurance for a flip- better coverage

2. flood- ok, try to use the same policy as the seller if a claim was paid on it already

3. ok, you are better off getting your own RE license though

4. need an operating agreement, verify his GL Ins coverage, need written detailed scope of work

BIG TIP- EVERYTHING NEEDS TO BE IN WRITING BETWEEN PARTNERS.... NO EXCEPTIONS!

I went in and abused my BiggerPockets Super Powers to bold and underline this last part. It is the single BEST piece of advice you have received here.