When you purchase you first investment(s) property to flip, how do I know what to tell contractors to do, if I have no experience?
I have some dry-rot repair experience, from many years ago, but that's it. Do I get a project manager to oversee and figure out what to tell the general contractors, in order to make the property look good, so I can sell it?
I wouldn't know the first thing to tell them. I know the property needs improvement, and can point things out, but not what to put in its place. I wouldn't know whether to strip a place down to the frames, in order to move things around, or where to place fixtures, or take our a wall, to open up an area, etc... Is this what you learn as you go, or is there videos and/or classes on this type of subject?
Good contractors will tell you what you home needs either to be functional or be up to code. You won’t need to rip out walls unless you need to update electrical or have plumbing issues that are hidden behind them. If you already hired an inspector and know the issues, just go from there.
As far as where to put things- start doing some research on home design to get an idea of fixtures/lighting etc. to figure out what you want in your home. Also pay attention to the style of the home and pick these items based on that.
Hope this helps.
If you're this inexperienced you should get a home inspection done during your due diligence period and use that as your guide when directing your contractor. Do your own independent research on the various issues that need fixing so when your contractor gives you his scope of work you will have an idea if he's giving you good advice or not.
Thank you Julie and Max. I haven't bought a home yet, just trying to find out what would be good to do, before I start investing. I believe, going with some investors and watching whay they do, will be great learning.
@Sean K. I have never been in these shoes, however I would be very careful on bringing in a contractor and asking him to tell you what needs to be done. That is a very easy way for him to oversell you on the job. You really need a scope of work (SOW) that you create yourself. I will even say a home inspector is not going to tell you what you need to improve when flipping a house, he will give you a report of the general condition of the house, and any deficiencies. This may start the SOW creation process, but is not the only tool to use.
Work backwards. Find comparable homes that have been renovated and sold for good prices. What do they have, new cabinets, granite, stainless, etc... see what the cosmetics should look like in your end product. Use that and work your way through the house. Bedrooms, fresh paint, do all the comps have light fixtures, ceiling fans, hardwoods, etc? Go through the property you have and keep tabs on what it has and what it should have to sell for top dollar.
As far as "design" goes, you can have someone else do that for you, but expect to pay for it. If a layout works and fits the comps, don't change it. If other homes have open floor plans, you most likely will need to go that route or reduce your ARV.
There's a lot to creating a SOW and design, but at the end of the day research it as much as you can and it should come.
Well noted Brian. Thank you!
I recommend reading J. Scott’s - The book on flipping houses. You will be so happy you did. There is a whole chapter on working with contractors as well as a whole chapter on creating your SOW.
I would say do some comps for recent sold properties that’s remodeled and see how much your flip would be sold for if u do the same amount of work, then you can tell if you are making a profit or
Since you dont have much experience with flipping I would highly recommend you have a home inspection when you purchase the home so that you know the issues ahead of time. As far as the cosmetic repairs you'll want to make - find a good realtor and contractor. This realtor will sell your home so they have incentive to make sure its marketable as well. A good agent has worked with investors/flippers and knows what it takes to sell a home in a particular area. They can take you through other homes in the area that are selling that have been remodeled so that you can get an idea as to what level of upgrades you might need to make to sell the home for a profit. Your inspection report, realtor and contractor's advice should help. Ultimately its up to you so do your due diligence on the market (see homes and get online and look at homes for sale that have been remodeled) and the remodeling trends (know what is trendy/unique vs. standard practice in your area).
Best of luck to you!
This will come across as a somewhat simple response, but I would recommend multiple bids. This is likely intuitive, but don’t just ask one contractor to come by and take their recommendation for doctrine.
Set up multiple appointments for recommended contractors to come by and while you are walking and talking, ask lots of questions. Take notes if you would feel comfortable and make sure that you feel comfortable with what is being said, if something doesn’t make sense, ask about that.
What you are doing is not only gaining knowledge from contractors, but it will help you begin to see how contractors bid and assess work. Take your notes back and review them. Items that are consistent and deal with code are non-negotiable; get that work done. The cosmetic recommendations you can make your own decisions based on what you feel the ROI will be on each.
The recommendation shared in an earlier post to have an inspection done is also very valuable; again, lots of learning and education because you can ask questions and get answers. Just ask around for a reputable inspector and take advantage of the fact that you are paying for the inspection and get some knowledge.
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