Flipping a house is difficult.
I don’t care how many HGTV shows make it look simple — I’m here to tell you that it’s not. In order to successfully flip a house, you need to source a good deal, find investors to fund your deal, go through the machinations of closing on the deal, renovate the property, be lucky enough for the market to hold its pricing, and then find a buyer to purchase the property for the amount you want. A book could be written on each and every part of the process!
The most difficult step in my opinion is renovating the home effectively. There are factors like budget, level of finish, project management, and timing that all need to fall into place — and I’m not even going to get into how difficult the permitting process can be in some municipalities. I have managed the renovations of close to 500 homes, with over 100 of them being for flips. The margin of error for flip renovations is much smaller than for rentals, and so that is the topic I will address today.
The biggest key to renovating a home successfully is to have a process. There are simply too many things going on all at the same time to “wing it” and hope for the best. You need a process as a check and balance to ensure that you don’t forget something, and also to force you to be efficient with your time. When I was renovating dozens of homes per month, albeit only rentals and not flips, I would have gone insane if I didn’t follow this process.
My 6-Step Process to Renovating a Flip
1. Make a list of absolutely everything in the house that could possibly be fixed or replaced.
This is so important on a flip because even things that are in “good” condition could need to be replaced if it makes sense economically.
Related: The 3 Habits of a Highly Effective House Flipping Team Leader
For example, imagine you buy a foreclosure for a million bucks, and it has a fifty thousand dollar kitchen. I’m talking swank mahogany cabinets, sweet wood flooring, marble counter tops, and the best layout in the history of the world. Let’s also say that the projected resale on the home is in the $1,500,000 range, and that the stove is an old white piece of junk, but it works just fine.
This is obviously a hypothetical situation with numbers that are exaggerated to illustrate the point, but it would not be out of the question to purchase a $15,000 custom stove for this property. My point is that you need to include absolutely everything on this list, whether it’s working or not.
Here are some of the items that you should be looking at:
Door Handles and Hinges
Outlets and Plugs
Kitchen Sink and Hardware
Closets and Closet Doors
Bathroom Mirrors and Lighting
Bathroom Towel Rack Set
Hot Water Heater
It may seem like this list is overkill for many homes, and you may be right. But you should still create your own list like this and go down each and every single item for each room so that you don’t miss anything. The next part is that you need to define the scope of what you want done. You want to be as specific as possible.
The list could look and be categorized as below:
Notes and Specs
Deep patch, overlay, crack fill, seal coat, and restripe the deteriorated asphalt parking lot per inspection report.
Repair damaged carport roofs per inspection report.
Install safety railing above laundry room entrance per inspection report.
Replace missing sections of vinyl siding and aluminum eaves per inspection report.
Feel free to structure the list in a way that is useful to you, but ideally you would put the list into an Excel document.
2. Have two contractors, plus subs, bid every item on the list.
This is an important, and often overlooked, step. It is easy to say, “Oh, well the white stove works, so let’s just not get a bid.” The contractor may be lazy, you may be lazy, or you may just have a really good idea that you aren’t going to replace the stove. Get it bid on anyway. The reason is that you may be surprised at how cheap the bid comes in for a particular item, and the great price may make it economically viable for you to do the work.
Your contractor could come back and say that he has a great stainless steel stove in his garage from a different job and that you can have it for half price so he can get it out of the house before his wife divorces him! In this scenario, you may be more likely to replace the white stove, but you never would have had the option if you hadn’t listed the white stove on the bid list and then forced the contractor to bid on it.
The other point to be made here is that you want two contractors to bid every job, and you want them to bid the exact same spreadsheet. The goal is to try and establish an apples-to-apples bid. I understand it may be hard to find two good contractors if this is your first flip deal and you have no track record. I called on close to a hundred different contractors and subs before I narrowed down on three guys who made the cut.
As I said at the start, flipping homes is difficult.
3. Have a designer opine on the finishes that you should use to create a consistent, quality level of finish.
I’m sure that you are super in touch with the latest crazes in home remodeling, and that you watch every home design show in …read more