All Forum Posts by: Dion Hickles

Hi Andrew, there's so much information out there about construction and updating homes to flip, so I'll try and condense. What you want is to limit your risk at the start of the transaction, especially starting out. I'd stay away from properties that have structural damage, water damage or fire damage. These flips are considerable and would take more time and money to finish. A good strategy is to choose a neighborhood in Chicago or the burbs where your After Repair Value (ARV) creates a return that is commiserate with your risk that you're taking. You'll want to buy the house that doesn't look great or is rather outdated on the best block. If you can, choose a home that has been lived in for a while that has dated finishes with a good layout. This way, you can capitalize on the existing structure and update the home with new finishes thereby minimizing the amount of updating you'll need to do to bring the property to market. From there, utilize websites that have verified, positive public reviews for contractors for hire. This is extremely important. You want a contractor that you can trust and that will show up to the site each day and get the job done in a timely fashion with an eye toward quality. Also, be sure you are on-site daily with the contractor because a good one moves fast and you will want to be able to make design decisions in the field as they have their subcontractors lined up to do the work. This will help mitigate your risk of schedule delays, quality install and help build a good relationship with a quality contractor.

Hi Heath, you have a good start. First is getting control of a property that has potential. You want to stay away from properties that have structural issues, water damage or fire damage. Everything else can be fixed with a reputable licensed contractor. When researching a contractor, be sure you get a contractor that has written/public reviews from customers they have worked with before. The key here is to build a good relationship with this contractor so that you can replicate your strategy and fine tune it down the line. Also, be sure you are taking daily photos and creating reports of what happened as construction progresses and which trade was there and when. These reports are beneficial later down the line as you'll want a record to look back on should there be any issues that need to be worked out. 

You will need to be both and you must have your investment criteria defined beforehand in order to act quickly and keep your emotions balanced when tensions rise at the time of transaction. Figure out what location you want to invest in, how much cash you want to put into a deal and have your trusted relationships lined up. If you don't have trusted people in your corner, you're setting yourself up to get burned. When flipping/improving or investing in property, I liken it to a red light/green light game. You must know when to go fast, slow down and stop. If you do any of these actions at the wrong time, your risk level rises, potentially missing out on a deal that would work for you. 

I've never seen a reverse mortgage work out in the end. You want to set yourself up so that you do actually win from the untapped equity in your home. Use the equity in your home to get involved in another deal with a broker/construction manager that you trust. Many look for the arbitrage opportunity in the deal, but there will always be a trade-off in finding the seeming free lunch. Get clear on what your investment criteria is and then stand firm in that when you're evaluating deals. Emotions will run high in a real estate transaction, but there is profit to be made in real estate and construction. Stay level, figure out what location you'd like to invest in and focus on people that you trust, are qualified and can help you create security for yourself and your family. Reach out if you have more questions or would like to kick around strategy. -