As a flipper in the Midwest, we do the majority of the work on our house flips ourselves, due to the tight profit margins. With that being said though, when there are jobs best left to professionals we do hire that work out such as electrical work, roof work, HVAC work, etc… To make sure the job is done right and the first time.
While you certainly want to maximize your profit when flipping houses. The list price of the home needs to be based on actual comps in the neighborhood. Overpricing a home usually leads to long days on the market and additional carrying costs for the home. Think about the opportunity cost of overpricing your home if it takes the better part of a year to sell. By pricing the home correctly and selling quickly you could have freed up the capital sooner and bought and sold another flip in the amount of time you were waiting for the first house to sell.
When flipping houses speed is the name of the game.
Many first-time house flippers will usually try and sell their house flip as an FSBO or For Sale By Owner due to the high cost of real estate commissions. Because a typical 6% real estate commission on the sale of the home is certainly a tough pill to swallow. However, you might be surprised to learn that FSBO’s typically sell for less money compared to agent-assisted home sales. According to the National Association of Realtors FSBO homes sold for the median sale price of $200,000 while the median agent-assisted home sale sold for $264,900. Meaning that any money you might have saved by not using a real estate agent you more than likely lost anyway because the house didn’t sell for as much money.
Make sure you use high quality and professional pictures for the marketing of the home that shows the home in the best possible light. Remember, most buyers start their home search on the internet. And oftentimes the first showing of your house is actually taking place online with the photos of the home. So if the home doesn’t show well online it can hinder the amount of interest in the property.
If you are using the services of a Realtor when selling your home they will handle this for you but make sure that your home is everywhere the buyer’s eyeballs are including Zillow, Trulia, Realtor.com, etc… The goal in marketing your flip is to make sure as many people see and know about the house for sale as possible, which will go along way in getting the home sold quickly and for top dollar.
First, research your local real estate market. Where do people want to live right now? What kind of house do people want to buy right now? Don’t speculate about up-and-coming neighborhoods. Remember, you want this house sold fast.
Next, become an expert on home financing options. Will you buy a house with cash? Will you apply for a home mortgage loan through a company like Credible* or take out a HELOC? Make sure you understand the ins and outs of home financing before you apply for a loan or make an offer on a house. This will allow you to make the best decision for your circumstances.
Analyze how much house you can afford and how much you can afford to lose on any deal. Experienced flippers follow the 70% rule when analyzing how much they’re willing to pay for a house. This rule states that investors should pay no more than 70% of the after repair value (ARV) of a property minus the cost of the repairs needed. Let’s say a home’s ARV (or value after necessary repairs) is $200,000, and it needs $30,000 in repairs. The 70% rule states that you should pay no more than $110,000 for this home: $200,000 (ARV) x 0.70 = $140,000 – $30,000 (repairs) = $110,000 This rule is a good guide to follow when you first get into house flipping as it can help you avoid overpaying for a home.
The less money you invest in a house, the more money you can earn during the flip. Good negotiation strategies will help you effectively haggle with contractors and other workers.
Do you know how much it costs to recarpet a 1,000-square-foot home? Rewire a house? Build a deck? Landscape a yard? Every project is different, but with some experience, you can learn how to estimate the costs of many home renovations and get an idea if a particular home is a good buy or not. One of the best ways to build your experience with this is to do some renovations on your own home. This can also give you a general idea of the type of projects you like to do and which projects you’re better off hiring out. Know which home improvements increase a home’s value and focus on these projects first. These might include upgrading kitchen appliances, repainting the home’s exterior, installing additional closet storage space, upgrading the deck, and adding green energy technologies.