What You Need for Real Estate Flipping
Maybe you’ve seen home renovation shows and think flipping houses is a great way to make money. It can be, but let’s get this straight: it’s not a get-rich-quick scheme.
If you’re using it as an alternative investment strategy, here are some things you’ll need to get started.
- Money. Flipping houses requires money— your savings or money from a credit provider. So, you’ll need enough to cover the property purchase price, capital gains tax, plus renovation costs.
- Good team. A successful house flip requires contractors, electricians, plumbers, and other professionals. You must find reliable workers who can do quality work within your budget.
- Realistic timeline. One mistake new house flippers make is underestimating the time to complete a project. So, make sure you have a realistic timeline for each step of the process (more on that below).
- Solid plan. Renovating for profit is not something you can just play by ear. You need a solid plan to stay on budget and schedule — and, of course, achieve your vision.
- Flexibility. No matter how well you plan, unforeseen obstacles will always be along the way. You need to be flexible in dealing with these challenges to complete the renovation on time and within budget.
- Discipline. Flipping houses requires a lot of discipline to stick to your budget and timeline. There will be temptations to overspend or cut corners. But if you want to be successful, you must resist these urges.
- Patience. Once again, this thing goes hand-in-hand with having a realistic timeline. You can’t build a home in a day, and neither can you fix it! It takes time to find the right property, renovate, and find buyers willing to pay top dollar for your work.
- Business acumen. You don’t need to be an expert in real estate or construction right away. But it helps if you have some basic knowledge that you’re willing to develop so you can build for profit successfully.
- A thick skin. Renovating houses for profit isn’t for the faint of heart. There will be times when things don’t go as planned, and you’ll need a thick skin to weather these storms.
The Process of Renovating for Profit
Now that you’ve got all the things you need to get started with renovating for profit, the big question is – how do you even do it?
The truth is, it’s quite a daunting process! Understanding the process from beginning to end can help you see the big picture clearly and create a strategy to help you achieve your overall vision and undertake the project with as minimal delays as possible.
The Design Process
During this (fun!) part of the renovation process, you’ll be engaging with design professionals to help you…
- Plan and produce a detailed design documentation
- Complete structural engineering documentation
- Complete a geotechnical survey
… and other variations of such, depending on the level of documentation you need.
Keep in mind that the design process is actually the longest part of the renovation process. It can take anywhere between 3 months to 2 years — on average, but if you are renovating for profit, you can not afford to take that time, you need to know what you want and get started as soon as the ink has dried on the contract.
After all, your land surveyor would need time to get the boundaries of your house before your designer can take measurements for the design concept (but there is also the potential to negotiate for this to happen inside of the settlement period too!)
The concept itself should be a collaborative effort between you and your designer, so expect a lot of back and forth until you’re happy and ready to commit to the design of the house! And remember to check your design against your budget, so you don’t overspend and reduce your ROI.
To help you minimise the time you spend in this part of the renovation process, you should…
- List down your must-haves and nice-to-haves to help you come up with a clear design.
- Create a comprehensive mood board to nail down the house’s look and feel.
- Shortlist your chosen designers and research them to find the perfect fit.
- Make sure you have all the documents prepared for every stage of the design process.
The Tender Process
Often lasting between 2-4 months, the tender process isn’t as fun as the design process, but it’s absolutely essential.
First, you need to decide if you will hire a builder, be an owner builder or perhaps even work in a blended buildHer model. This will help you figure out the level of tendering required.
Be sure to read the details of every quote you receive. Sometimes, the tender that looks the most cost-effective might end up being more expensive and time-consuming if you’re not too careful.
Also, check if there are any underlying issues and non-liquidated damages, as these might delay this stage.
As for your builder, ask for their lead times and overall construction time. Most of the time, the really good ones are booked out for a year or so in advance. They might even be tendering 4-5 projects at once but only be able to take on one.
The Construction Process
We’re pretty sure that when we talk about house renovation, the construction stage is what immediately comes to mind.
Like the design stage, the construction process can be as short as three months or as long as two years. The actual amount of time depends on the amount of work required and how big the construction team is. Delays can happen even with the best-laid plans.
The Defects Period
Finished building the house? Well, it’s not over until the defects end!
Lasting for about six months, the defects period can be divided into two phases:
- Just before the new owner moves in
- Ironing out inevitable house issues like roof leaks, aircon settings, door handles, etc.!
Before you start selling the house for profit, you’d want to have as many of the major defects fixed as doing so much later can cause much more inconvenience (even if it’s just fixing a scratched door panel).
And finally…
The Styling Period
Again, we go full circle to the fun stage!
In the styling and furnishing phase, the house you renovated for profit is turned into a home. And unlike the stuff shown on the telly, it can take months to finally finish the process of decorating a home when you are working on a home to live in, but again if it is a renovation for profit, then time is money, and you can not afford to waste time mucking around furnishing and waiting for suppliers long lead times.
If you want to go into the nitty-gritty of the house flipping process, check out some of our free resources here!
4 Tips for Successful Property Flipping
There’s more to renovating for profit than just buying low and selling high. Here are some tips to help make sure your flips are successful:
Find the Right Property
Not all properties are good candidates for flipping. Look for a structurally sound and undervalued property in the local market with good bones that need cosmetic updates. And don’t forget to avoid properties that require major repairs or renovations.
Once you’ve found the right investment property, it’s time to start making changes. Remember that even small things can make a big difference!
So don’t be afraid to put your personal touch on things. After all, this is your flip, and you want to make it unique.
Don’t Overspend on Renovations
Would you like to know how a property investor can screw up an excellent investment? Over renovate!
New property investors buy a house and get all excited about the possibilities. And then they go wild with their renovations and add unnecessary extras. Or they sometimes neglect practical considerations and push their budget to the limit.
And when all is said and done, they’ll be lucky if they break even on the sale.
So, don’t overspend on renovations. Stick to practical, affordable updates that will increase the property’s value.
Be Prepared for Setbacks and Delays
Things can sometimes go wrong. There may be delays in getting the work done or problems with the house itself. There could be hidden damage, old wiring, or termites. And if you don’t prepare for these problems, they can set you back.
That’s why it’s crucial to have a backup plan to prepare you for anything.
Know your financial situation and ensure you have money to cover unexpected costs. Be realistic about the timeline for flipping the house and building in some extra time in case of delays.
Build flexibility in your budget and schedule to deal with delays. That way, you can avoid stress and stay on track to finish your project on time and within budget.
Things may not always go according to plan. But if you prepare for setbacks, you’ll be more likely to succeed.
Hire a Builder or Contractor that you work well with
Hiring a builder or great contractor can be a hassle-free way to complete your renovation project without having to do it yourself. But before you hire someone, there are important things to keep in mind.
- Get several quotes from different contractors, trades and builders. Doing so will help you get the best possible price for the work.
- Check references before hiring anyone. Make sure that the contractor you’re planning to hire is reliable and trustworthy.
- Be sure to understand the scope of work before hiring someone. This way, you’ll avoid any misunderstandings or surprises down the road.
- Understand your communication process! Communication is key, and workshopping scenarios and understanding how the build will play out is most important!
Once you’ve found someone you’re comfortable with, sit down and review what you want to do. Be sure to be clear about your expectations and budget.
Interested in building homes for profit? At BuildHer Collective, we empower women with the right tools to build the home of their dreams or investments.
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