So You Want to Flip a House…….. (Part 2)

     Welcome back to part two of an educational piece I like to think of as “basic house flipping 101 for the pre-beginner”.  When we last left our dynamic duo they had found a house prospect and funded it.  Buckle up and let’s watch as they figure out how to fix and flip it….

     Step 3 = Fix it.

Finally we get to the rehab part!   Start with sitting down and writing out a detailed plan, aka “scope of work”, for what you plan to do.  It helps to separate it into what needs to be done, what you want to do, and what could be done.  Budget may necessitate prioritizing and you want to make sure you get through the most important parts in case there isn’t enough money to do everything on your list. 

     Consider your location when deciding how far to go.  Is it an affluent area with large gorgeous houses all updated so that potential buyers are expecting a lot?  Is it a middle-range neighborhood?  Is it an easy-to-afford area with a ceiling on how much a buyer will spend to live there?  In some cases you need to be careful not to over-rehab since you might not make that money back on it.  Some buyers will spend a lot to buy in a desirable town even if the house isn’t perfect.  On the other hand, many will not pay more for a house just because it has been immaculately rehabbed if it is in a less desirable area.  Keep your prospective buyer-audience in mind before you jump into action.

     Rent a dumpster first and do all the demolition in the beginning. (And know that the dumpster will kill the grass underneath it, so place it accordingly.)   Keep the stages of every room of the house at the same pace.    (Meaning, for example, don’t do the whole kitchen start to finish, then move on to the bathroom, and so on.)  In the end, there’s less chance of needing to go back to re-do things and

it’s more efficient this way.

     Make sure you have submitted plans to the town inspector for approval before taking away or adding any structural changes.  (The approval letter should be posted in a door window or somewhere else easy to view from the outside).  Also be sure to contract licensed electricians and plumbers since this is work that will only be approved if done by a licensed professional.  In the end, it saves time to spend time doing these things in the beginning.  Otherwise, they can make you stop while you go back to do it retroactively.

     I liked doing the major outdoor jobs first, to up the curb appeal for the entirety of our working on the house.  No one will know the inside is still a mess when they are looking at how much nicer it looks now as they drive by.  On the flip side, they won’t even think about the possibility of it looking better on the inside if they can’t get past how weathered it still looks on the surface. 

     Once inside, there is a general sequence that is helpful.  Even though we knew it, we detoured off it from time to time, and always seemed to have to go back and re-do things a second time.  So even if it seems like it will get something done quicker another way, be patient and stay on your initial timeline.  Start with ceilings (repair, then paint), then the walls (repair, paint the wall, then paint trim), and  save the floor for last.  (We learned this the hard way as I dripped wall paint on my husband’s freshly sanded wood floors…..   oops!) 

     On this timeline, heating/air conditioning, plumbers, and electricians should go in right away after the initial demolition (if there is any).  They need to get at some things in the walls, so you don’t want to finish those walls only to have them cutting holes back in them.  After that, you can decide what other parts you’d like to take on yourselves, versus hiring out to contractors. 

     Contractors will get it done quicker, but cut into your profit more.  Doing it yourself costs less money, but takes much more time.  (And remember that every month it takes you are paying additional holding costs.)   It comes down to whether you’d rather save time (and sell it faster) or save money (and keep more of the rehab reimbursement money in your own pocket).       

     I’m sure we’ve all heard that kitchens and bathrooms sell houses, and we’ve found this to be true.  Right now many buyers are expecting granite (or comparable) countertops, stainless steel appliances, and some type of island (for ease of working around or gathering while entertaining).  They are also looking for open and spacious floor plans, so if you can’t structurally make changes to achieve this, try to create it with consistent colors and materials that will visually connect the rooms. 

     Step 4 = Flip it. 

Here comes the selling part – the reward for all your hard work!   I would recommend using a realtor to help rather than managing this part yourself.  There can be a lot of time spent fielding calls to answer questions and set up tours – time you should be using to start looking towards your next venture.  Let a realtor deal with the legal aspects so you can just focus on the important part – making a profit. Also, having been involved all the way along this venture, you will feel protective of it.  We learned that it’s tough not to feel defensive when folks have critiques, make low offers, and give lists of changes they would want made.  It helps to have that buffer person who can remain neutral and give you time to think before you respond. 

     Determining price can be tricky.  The quicker you sell it, the less months you are paying holding costs, and therefore more money you keep in your pocket.  Remember, listing it $10,000 too high, hoping the barter brings it down to exactly the price you’re hoping for, could mean it sits longer.   You could be paying thousands in holding costs for every month you haven’t sold it, so if it sits a few months, that quickly becomes a losing strategy.  You need to find the fine line between pricing it high enough to make the profit margin you needed to make this endeavor worth it, but low enough that someone looking in that area would be crazy not to choose YOUR house. 

      Analyze the comparable homes in that town  (similar in square feet, number of bedrooms, number of bathrooms, etc).   Look at 3-5 houses that have currently on the market, and 3-5 that have recently sold.  Take out the lowest and highest numbers in each category.  What’s left now serves as your range.  The middle number of the competition houses could be the number you ask for (with an idea in mind from the beginning of how low you would accept).  The middle number of the recently sold prices is probably right around your “priced to sell” realistic target.      

     The first thirty days your house shows online as the newbie to choose from will be the time of highest interest.  If it hasn’t resulted in enough in-person tours or concrete offers at the end of that first month, make a change to your listing.  A price reduction will put you at the top of everyone’s search list again for what’s new out there.  Hopefully that will get you another month of peaked interest.

     Staging can also be a helpful way to increase interest and offers.  When potential buyers are looking at pictures online, or in person during a walk-through, you want to show them what it would be like if THEY lived there.  If the rooms are filled with too much, whether it be knick-knacks or family pictures, it makes it harder for them to picture THEIR things in there.  On the other hand, if you show it empty, some people may have difficulty envisioning how they could use certain spaces.  The perfect staging is just a little bit of basic furniture to give them ideas of how room spaces could be optimized.  This is especially true for awkward spaces.  For example, with an odd-shaped deck, putting out some basic outdoor furniture might help them imagine how that space could transform from awkward to unique.

     So there’s your introductory “how-to”!   The best advice I could give to the me of last year would be that, when you feel overwhelmed – just keep moving forward.  Don’t look at the whole picture of what needs to be done, just focus on the one next thing on the list.  The only way to lose is if you stop.  It’s ok if your steps seem smaller and slower on some days, just keep taking them and you eventually will get there! 

     What I found most interesting was the difference between what we expected from watching flipping shows on tv versus our own first-time experience….

     Our first endeavor, from start to finish, will be about 1 year.  It took about 3 months to find a house that fit our financial parameters and fund it.  It then took about 6 months to fix it.  And we’re looking at about 3 months to flip it by the time we close.  And that’s ok, the beauty of doing this is that you are on your own time schedule.   But, when you go in trying to calculate what a 30 minute show would equal in real-time, it’s a huge difference.  Also, you don’t always see that they have teams of contractors coming in to help, while you may be doing it mostly yourself. 

     And those cute outfits?  I think I may have worn one the first day – and never again.  You end up dirty from head to toe on a daily basis and need something you don’t have to keep adjusting as you reach and squat.  Cute shoes are traded for strong sneakers or work boots since you will inevitably drop and step on a lot of things you aren’t planning on.  My hair barely came out of a bun under a baseball cap so I wouldn’t get mold, dry wall dust or paint in it.  You quickly learn not to bother with make-up since you just sweat it off, which looks worse.  I couldn’t figure out how Chirstina still looked so great at the end of each “flip or flop” project….  but I sure felt proud of all the firsts I accomplished….  and that had a glow all of it’s own.

     The jovial banter in decision making turns into more of a staring contest show-down, and who can repeat their reasons over again the longest.  (That ultimately ended as a tie, because it always depended on who was most tired and hungry that day and just wanted to complete the task so we could go home.)  During some drives home there would be an eerily melodic “I love you” said through a sigh, on both sides,  as if we were trying to remind ourselves and hang on to that thought, even though it could get harder to see through the clouds of exhaustion. 

     But at the end of it all, it really bonded us.  Standing side by side, looking at this HOME that WE brought back to life.  We gave it a chance to be filled again with a new generation of love and laughter. How cool is that?!   We felt proud of ourselves that we had completed this huge challenge TOGETHER, improved a neighborhood, and managed to still like each other in the end.