Under contract. Now what?!?!
It was not too long ago we had our first flip under contract. In less than two years, we are now onto our fourth property. While still new to the flipping business, we have learned a lot over the past two years. Probably the most important lesson is you can start working on your flip the day you have it under contract. Here's how:
1. When you make an offer, put in the Agreement of sale a request to have a few days where you can take measurements of the house, take pictures/video, bring your team in to look at the property, and give you estimates.
- Pros: Solidify your renovation plan, and budget by obtaining estimates prior to your acquisition. Provides another opportunity to double-check the renovation scope (this is extra beneficial if you were rushed at the first viewing, or if you were not allowed in the property). If there is an aspect that is new to your renovation, or if you do not have a dedicated rehab team, it provides the ability to get multiple subs in to provide bids. Taking pictures/videos allows you to review the property when you are not there, as well as provide “before” pictures of the project.
- Cons: None.
2. Set a tentative schedule. This schedule contains more detail than the schedule you made when you submitted your offer (read: establish daily schedule).
- Pros: When selecting your subs, you will be able to provide a tentative schedule.
- Cons: It's a lot of work, but remember Proper Planning Prevents Poor Performance.
3. Select your contractors. Review the estimates, contact your first choice subs, and confirm the schedule with them.
- Pros: Selecting your contractors, allows work on the house to commence the day you get the keys. Selecting your subs, also allows you to get all paperwork (contract, SS#, proof of insurance, and license) completed in advance, so they can focus on your house. Providing dates to your subs allows for them to be available when you need them.
- Cons: You need to stick to your schedule! Without sticking to this schedule, you run the risk of a downstream contractor having a conflict because you bumped them earlier.
4. If you are doing any additions, or need any drawings drafted, get your architect in there during this time. As you cannot submit for permits until the house is in your hands, having the architect drawings completed prior to acquisition allows you to drive from settlement to the township building. Note: Most townships will request a copy of the settlement sheet when submitting a permit on the day you settle.
- Pros: Any delays caused for permit approval is drastically decreased by submitting on Day 1. Having the drawings in advance also allows your subs to accurately estimate the work needed for the renovation and finishes.
- Cons: You need to pay the architect. Thus, if you decide not to move forward with the house for any reason, most likely you will still need to pay the architect.
5. Utilities! Don't forget to call all utilities and insurance providers to set up accounts.
- Pros: Setting up a business account for the first time with a provider can take time, and cause a delay in your project. Establishing utility accounts early ensures the house will have all necessary utilities working on Day 1.
- Cons: If there are any changes to the settlement date, you need to call back and update the companies with the new effective date.
6. Ordering materials. If it is a quick flip, you absolutely need to order materials right away.
- Pros: Materials will be there in advance of the subs needing them.
- Cons: Materials take up space. They will need to be stored somewhere that is out of everyone’s way. And lastly, you are buying items prior to the house actually closing.
7. Administrative Items. Be organized from the beginning. Make sure all templates have the new house's information, and are ready to be used. Print out extra copies, and always have them with you when meeting with the subs.
- Pros: Starting organized, creates a higher likelihood that you will stay organized.
- Cons: Administrative work can be tedious, and it is definitely not the glamerous side of the flipping business.
Two years ago when we bought our first house, we did all of these steps after we purchased the property. The renovation took over seven months to complete. During our post-analysis, we discovered that we could have saved over three months, if we had just taken the actions listed above. Since then, we execute the seven above actions for every house. It is because of those seven actions above, we are now on our fourth house in less than two years of business (three in this year alone)!