House Flipping

Written by 
Rate this item
(0 votes)

There are so many TV shows out there now regarding flipping houses and making quick/easy money that you might be tempted to undertake a similar venture but is it really as easy as it is on TV?  Nothing is ever easy...

Ahhhh television.  Whether it's flipping houses, new fashion looks or the vacuum turned haircut machine usually nothing is as straight forward as it seems.  I have renovated and sold homes myself in Wellington West but neither could be considered a "flip".  Flipping a house involves getting in and getting out of a property as quickly as possible to eliminate as many of the carrying costs as possible.  Mortgage payments, taxes, utilities and insurance all eat into the bottom lines of "flippers".  It is a high stakes game and some people can do it very well but there are lots of people out there that end up flipping until they flop.

In my case, I completely renovated the homes and lived in both (4yrs and 2 yrs respectively) before selling them, avoiding capital gains.  A major consideration.  It is not an easy existence and definitely not for everyone but it does keep the tax man out of your wallet.  Here's a few things to consider if you are thinking of flipping a house or looking to renovate one for resale down the road.


1) Patience

This one is key and the reason I have placed it at #1 on this list.  Buying a home is an emotional decision but you are buying an investment and need to take the emotions out of the equation.  Finding the right place, in the right neighborhood, at the right price is a time consuming process.  Sure, you may be eager to get on with it and start ripping down walls while eyeing that new kitchen you'd like to install but you have to get the details bang on.  You need to make sure you are making your $$$ on the way in and not just counting it on the way out.  This means finding a deal.  They are out there but they aren't easy to find.  Making offers on a place is great but getting it at the price you want and need takes time.  Patience.

2) Location

It's the oldest slogan in real estate.  Location, Location, Location.  The desirability of a neighborhood cannot be overlooked.  So what if you got a steal of deal in a far flung neighborhood that is next door to a gas station, down the road from a detention center and the stores shutter their windows and doors at 6pm?  At the end of the day you have to be able to sell it.  That's definitely not to say looking in neighborhoods still slightly tarnished doesn't have an upside but you have to see where the $$$ is and if it's flowing or trickling into your neighborhood.  I am a big fan of urban living and one of my criteria is that it has to be within walking distance to a coffee shop (my biggest weakness...hello Bridgehead), a pub/restaurant and within a desirable schooling district.  More and more our society and cities are moving towards walkable neighborhoods.  If I have to get in my car to get to a corner store...

3) Skills

Project management skills are a huge part of this process.  Being able to schedule trades, budget properly (always have a contingency fund!) and make a thousand decisions in a short period of time are crucial.  Another skill that really can't be overlooked if you're serious about flipping or renovating a house are your own handyman skills.  These skills (if you possess them) can help smooth over bumps in the road, save you a ton of $$$ and salvage potential disastrous situations.  There will be times when your carefully schedualed trades will not show up and to keep the project moving you'll have to get your hands dirty and have the knowledge to keep things on track.  It's great to be a "jack of all trades" but know your limitations and what you have to leave to the pros.  Sometimes not doing something you are unsure about is smarter than attempting it and having to pay for somebody else to fix/redo/bill you 2x for it.

4) A Solid Team

As with any business decision (and make no mistake about it, this is a business decision) you have to surround yourself with a qualified team of professionals.  As with any real estate investment, the usual suspects apply.  A Realtor you know and trust, qualified mortgage broker, a lawyer who specializes in real estate, insurance agent, solid home inspector and an accountant.  On top of all that, you need to have or be able to get, a group of trades and suppliers to be in your corner.  General Contractors, Electricians, Plumbers, Roofers, Drywall Installers/Tapers, Tilers, Painters, Window and Door Suppliers, Cabinet Installers, Tile Suppliers, etc etc etc.  The list can be endless.  Recommendations are huge as well as the ability and knowledge to properly price out what it should cost so that you can negotiate the best deal possible for the work.  Remember, everything is negotiable.  I have many different trusted trades/suppliers who I work with and that has taken years to accumulate.

5) This is not YOUR home

The mentioned above item will help you here.  One of the problems inexperienced renovators or flippers get into is not being aware of the market conditions for certain neighborhoods.  Don't put in that toilet with a bronze heated seat, built in bidet and warm air dryer if you're not going to get the $$$ back and more.  While it may be on your wish list for an ensuite make sure that your target market is always kept in mind.  The same thing goes for personalizing a space, that graphic wallpaper may appeal to your inner designer but chances are it will repel some potential buyers who look at it as future work to be undone.  Appeal to the masses, at the right price point and with the right upgrades.  High end finishes in a low end market will kill your bottom line.  Always have an eye towards the sale of the property.

 

This is just the tip of the iceberg so to speak.  The list could be 10, 20, 30 points long but these are at least some things to consider.  If you're interested in hearing some more details of things to look out for please feel free to send me a message.

 

Read 2015 times Last modified on Monday, 01 October 2012 13:59
More in this category: « Staging 101 Houzz.com »