We are always hearing about things that we need to be doing and things that we need to not be doing, but they usually aren’t dicussed together. Do this, but don’t do that. That’s what I did with this list of 9 do’s and don’ts when it comes to flipping houses.
- Do make sure you buy right. Make sure the numbers for the deal make sense. You make you money when you buy. Don’t count on appreciation.
- Don’t let emotion and the strong desire to get that first flip deal under your belt affect your decisions.
- Do make sure you have the ability to determine values and repair costs accurately.
- Don’t make wild guesses based on limited information and never, ever base your buying decisions on what other people are telling you. You have to do your own due-diligence.
- Do hire a professional to do the repair work. Take the time to find the right contractor that is licensed and insured. Hiring a professional to do the work will allow you to free up your time to do more important (read profitable) things and should produce a more professional product.
- Don’t just hire the first contractor you find on craigslist. Trust me, it’s not a good idea.
- Do have a written contract between you and your contractor that spells out exactly what is expected and at what points draw can be made.
- Don’t just hire somebody and have them start without a contract. DO NOT pay them half up front either! …unless you feel like losing money.
- Do look at what houses for sale in the area look like and try to make yours nicer, but without overdoing it.
- Don’t do a cheap, lipstick-on-a-pig rehab either.
- Do pay attention to how much you are spending on the house while you are holding it. You have to know what that flip is costing you every day that you own it.
- Don’t just blindly and slowly go about fixing up the house and let it take months, only to find out afterwards that your holding costs (loan payments, taxes, insurance, etc) cost you most or all of your profit.
- Do try to focus on the kitchen and bathrooms and anything that is special or stands out for each house. Maybe there is a dated fireplace in the living room. Maybe you could make it really stand out and set the house apart by tiling it with glass mosaic tile all the way up to the ceiling. Maybe the living room and kitchen are separated by a wall that can be removed which would open things up.
- Don’t just make it look like a white tornado blew through and make your house look like every other flip house that ever was. Make it stand out.
- Do stage your finished flip house. Staged houses sell much faster than vacant houses, especially if they are tastefully done.
- Don’t feel that staging the house will be a waste of time and money. It’s an investment with a high rate of return when it comes to how much is saved in holding costs and avoiding price reductions.
- Do price your finished flip right. Price needs to be based solely on what the comps (comparable sales) show you it should be.
- Don’t price it based on how much work you put into it or how much you’ve spent on it or what you feel you ‘deserve’. Those things have nothing to do with what the price should be.
Follow the advice of the do’s and avoid the pitfalls of the don’ts and you will have a much better chance at success in your house flips.
I’d love to hear about any do’s and don’ts that you might have. Please share them in the comments below. I look forward to reading them.
Photo: Carl Jones