5 Things I've Learned About Flipping Houses

Property Brothers, Fixer Upper, Flip or Flop - the list goes on and on of TV Shows that have become famous for letting women (guys too, but mainly women) fantasize over the thoughts of tearing up their house to enjoy the luxuries of the new trendy shiplap, granite countertops, and even turquoise front-doors. Gosh, I hate those colored front doors!

Anyway, the media has been a big factor in convincing us that flipping houses is a breeze and anyone can do it. Just a little paint and a little elbow grease - boom! It's all done! Although its true, anyone CAN do it, here are 5 things that you should consider before you embark on flipping or renovating your first home. Now, I'm by no means a professional (yet), but these are just 5 things I've personally learned about flipping houses as I just finished my first renovation project. Let me know what you think in the comments below!

1. Returns Are Everything.

Before you even start looking for a flip, you need to remember these two things: cheap houses aren't always good houses & the numbers don't lie.

If you watch any HGTV, you probably have seen at the ending of the shows where they display the purchase cost, renovation cost, and the total profit made. I love this part because it is the absolute most important part of the process. If your numbers are not right, the deal will fail and you'll lose money.

So, how do you know that a house will make a good flip? How do you know you'll make a good profit. We'll make this short and simple:

1. Find an investor-friendly realtor who can tell you what houses, that are remodeled, have sold for in the last 6 months in the neighborhood you are looking to buy in.

2. Once you have found the after repair value of your house, take that number and times it by 70% (that will give you a 30% profit margin - I don't recommend going any lower). Now once you have done that, take that number and subtract the renovation cost. Whatever that number comes out to be, that should be your maximum offer. Here's an example: let's say that you want to flip a certain house that costs $100,000 and it's going to take $20,000 to renovate. The realtor tells you the house will be worth $150,000 after you renovate it to 2019 HGTV standards. Take the after repair value of $150,000 and times it by 70%, this will give you $105,000. Now subtract your $20,000 renovation cost from $105,000 to give you your maximum offer. In this case, your maximum offer should be $85,000.

If the numbers don't work, I do NOT recommend you trying to make them work. There are plenty of deals out there, it just may take some time. If you have trouble finding houses that are flip-worthy, search on Craigslist, Facebook Marketplace, or my favorite - call a wholesaler (the guys who hang up those We Buy Houses For Cash signs all over your city, they'll send you houses they find that are not on the market).

2. Find The Trends

When you start running numbers on the house that you want to flip and you start looking at what needs to be done to the house, remember this: the house is not for you, it's for the end buyer.

Although you may like those lime green walls with fuzzy carpet, is that really what the end buyer is going to want in their home? Sometimes, you have to do what you don't like to make it sell faster. I may not like hanging a turquoise door on my front porch, but if that's what everyone else likes, I'll do it. It will make me more money faster.

As I'm writing this, everyone loves neutral colors. Grey, grey, grey, and more grey! Oh, don't forget shiplap. Find what's trending now and make sure to use those standards when running your numbers. You can look on Pinterest, HGTV, or even look at recently sold homes in your area to get a feel for what the house will need.

3. Can You Really Do It All?

One of the first things I learned quickly was that: I couldn't do it all & I shouldn't do it all.

I remember sitting at home on the couch with my mom watching Fixer Upper thinking, "Oh, I can do that stuff! I bet they make a killing too!" Just like many of you all, I thought that I could slap some paint on a few walls, lay flooring, change out lights, etc - how hard can it be? I got my first house and, oh boy, it was a mess. Wallpaper galore, old vinyl flooring, etc. - the whole place needed a major facelift.

I had never done ANY construction or renovation work, but I took to YouTube University and we started renovating the house. We tore up the old vinyl flooring, brought down the old wallpaper from way-back-when, and let me tell you, it was a lot more work than I thought! That day was the day I gained a whole new level of hatred for wallpaper. Sorry, but it's true!

As we continued the process of renovating the house, I quickly realized there were things I didn't have a clue how to do. Yeah, I could take the time to watch YouTube videos, but videos can only explain so much and I realized I could pay someone to do it 10x faster than I would and I could be making money somewhere else in the mean time.

So, don't think you can do it all. Unless this is your trade, don't expect to be able to do everything yourself, because it will only cost you money and energy when you could be focusing on something else your good at and you know how to do. Find a good contractor who can do the job for you faster and more efficiently.

4. Time Is Money.

Going off the first point, time is VERY crucial when it comes to flipping houses.

You know why? Time is money. The longer you take to flip a house, the more money that goes out of your pocket and eats away at your profit. People don't see this (and I didn't realize this) but there are holding cost of all types: insurance, property taxes, water bill, electric bill, mortgage, etc. Even though you may not actually reside there where you're working, you still have to pay all of those bills and they begin to add up - real fast. This was one of the mistakes I made on my first flips. I didn't find the right contractor, the project took longer than it should have, and I was stuck paying more bills than I had budgeted for.

Get the project done fast and you'll save yourself worry and money!

5. Expect The Unexpected.

Although we love to push projects out fast and get the houses listed on the market, just expect the unexpected.

There's always going to be something that comes up that you weren't planning for or budgeting for beforehand. You find mold, a waterline bust, your contractor doesn't show up, flooring comes in late, and much more - there's tons of scenarios that will pop up that you NEVER would have imagined. The question is: will you be prepared for those situations?

How can you plan ahead for the unexpected?

1. Don't underestimate time and expect things to move slower than you want.

2. Don't underestimate funding needed for the project. Budget an extra 10-20% to go towards unforeseen scenarios that may occur.

Setbacks will occur, but how you react to them will determine your success. You can either back away and shy away from the things that set you back or you can come up with a solution and solve the problem head-on.

These are just a few things that I learned on my first flip. I made many mistakes that I have learned from and I hope you are wise enough to learn from my mistakes so you don't have to learn through your own. If you have any questions or comments, drop them in the comments section below. Thanks for reading and tune in soon for another article on how you can create lasting wealth in real estate.

Oh! Don't forget to check out my new podcast, Real Estate Success Strategies! I will be using the podcast to document my journey in real estate. Go subscribe to it RIGHT NOW!