10 Rules for Flipping Houses In 2023
- eunicemae
- Aug 5, 2023
- 1 min read
The days of easy money flipping have come to an end. Interest rates are up, and the sellers' market has slowed with higher inventory and dropping home prices. The good news is that you can still make money flipping houses if you follow some simple rules. I have been building custom homes for 30 years and during the pandemic I started flipping houses as well. Many people were moving to Texas and the market for flips was incredible. Even though there is no replacement for my 30 years of construction experience, I would love to give you my expert advice so you can start flipping homes in your area. Let me start by saying that I have seen it all from million-dollar luxury homes to the neighborhood dump and everything in between. Following are my tried-and-true rules.
1. Know Your Market Area
Before you buy scout the neighborhood. Look on real estate websites like Zillow and HAR. Watch the area and see what is selling, what is not and how long houses are staying on the market. In addition, drive the neighborhood frequently. Many times, for sale signs go up before the property gets listed. Several of our flips have been purchased before the house actually hits the market. All of this helps you get a feel for the market area where you are looking to buy. Do your research and be an expert on the market areas you are interested in investing in.
2. Always Low Ball
I probably put in an average of 5 offers before I end up with a flip. I always start out REALLY low. Eventually you will find a motivated seller. My last flip I offered $100,000 less than asking on a $400,000 home. There is an art to low balling and not offending the homeowner. A good realtor can walk this line. Be patient. Sometimes I have had to walk away from a house and come back to it later.
3. Be Able to Close Quickly
Have a pre-approval letter ready to go or have an investor that can throw down cash. Make sure you let the seller know that you can close immediately after the title work is done. Since I have been in construction for 30 years, I often buy houses "as is". That means not having them inspected (I am my own inspector!). Many sellers like this because they don't have to deal with repairs from defects found in the inspection report. This also allows for a fast closing because you are not waiting on the inspection reports that can take up to 4 weeks. If you don't have the knowledge, partner with someone who does.
4. Consider A Partnership
If you are just starting out and don't have the experience, consider a partnership. If you can provide the money, think of bringing on an experienced contractor. Offer him 50% of the profits. I have done this before and it has worked out well. The investor provides the financing and all the money for repairs, and I do all the work. The profits are split 50/50. By offering half of the profits, you keep the contactor honest. The better he does, the more he makes. In the meantime, you gain experience. Eventually you will be able to do it on your own.
5. Remodel for Your Price Point
When you get that house, you are going to have a ton of great ideas. Knock out this wall! Get the Thermador appliance package! Put marble in all the bathrooms! Run those cabinets to the ceiling! Before you do any of this stop and take a breath. You should know your area from all the research you did in the beginning. Go back to Zillow and HAR and look at the remodeled houses that are for sale in your area. Then remodel your house accordingly.
6. Have a Plan in Place
Have a timeline and budget in place as soon as you close. Waiting to do these things will cost you valuable time. As soon as you walk away from closing the clock is ticking on your flip. Time is money! Become a scheduling master. Learn to coordinate your subs and have materials ordered and picked up or delivered on time. I can't tell you how many job sites I've seen sitting because the contractor failed to schedule the project properly.
7. Always Fix What Needs to Be Fixed
If your house has an old roof, replace it. If not, it will come back to haunt you when you sell. Sure, there are going to be some things here and there on the inspection report when you sell but none of them should be large item expenditures. Fix the roof and save money somewhere else if you can. I've seen flippers spend a ton of money making the inside of the house look nice while ignoring the foundation or faulty AC only to have to shell out at closing and blow their profit margin. Or worse, lose a sale all together.
8. Add the Bathroom or Shower
Most older homes don't have enough bathrooms by today's standards. Or the Master Bath only has a sink and toilet. The first thing we do is see if we can add a half bath or shower. In two instances we were able to make a shower out of a hall closet. This upgrade will pay for itself. Just go on Zillow and HAR and see the price difference between a 3 bedroom/2 bath and a 3 bedroom/1 bath.
9. Curb Appeal Matters
Spend Money on landscaping. Add a small tree in the front yard if you can. Add some seasonal flowers. Put a wreath on the front door and a potted plant on the porch. If the house needs painting, make sure it's painted. All the work on the inside won't mean much if you can't get them through the front door. Many families drive neighborhoods when they are looking for homes. First impressions matter!
10. Staging Matters and You Don't Have to Spend a Fortune
Staging a house is important, especially in this day and age. I have never paid a stager. My wife has a great eye, and we have some extra furniture that she's found online. Sometimes she uses some decorative objects from our home! I can't tell you how many realtors love the Ginger Jars she uses on the kitchen counters. You don't need a full house full of furniture. Just a rug, couch, coffee table, kitchen table and some decorations. My wife creates little vignettes that look great in photos. All you need to do is give people an idea of what the home looks like with a little furniture.
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