Where to start when wanting to flip a house…..
Well, let’s start by looking at the square footage and conduct a search of homes in that neighborhood/zip code that have sold recently, currently listed and active, and homes that have contracts pending. We want to look at the ones that are pending or just listed because those figures can sometimes show you if the market is rising or declining which is all relative to location, supply and demand. There is going to be a range and you want to make sure that you are comparing apples to apples or you it could significantly cost you. Proper math and calculations from the onset can keep you safe throughout the flip. Once you have that price point established as to what the average price should be for the home then we move on to the next step or set of questions.
You need to figure out what is wrong with the home or interior/exterior of the property/asset and how much those items will costs to cure.
Does the home need new flooring throughout? Does the home need a new kitchen? How do the baths look? Any light fixtures or boxes that should be changed around? How’s the roof? How many years old is the A/C or HVAC system? Does the water heater look dated? What appliances will need to be replaced? How are the ceilings…popcorn or knockdown? What color is the home and how fresh is that last coat of paint?
We must know the costs to repair the home and bring things up to date with the way the better homes in the area look. We must also know how much your typical resale costs you will have such as the following: Realtor Fee (6% of projected sales price), Closings costs on the front end and back end, and possible seller concessions that may be necessary. Now let’s just say hypothetically that your costs are added up and come to a rough $50,000. If the house is going to be worth $200,000 when you are completed, then you need to subtract that 50k from 200k plus whatever money you are looking to make on the deal…all while keeping in mind that you could be stuck carrying the asset for a few months or longer.
Formula: Potential Sale Price – Costs to Repair – Closing Costs – Desired Profit Money = Offer Amount
When you flip a house you need to make everything look completed. You don’t want to leave things undone because anything left unfinished will come up in objections or deductions in the potential buyers mind. If you are serious about getting the most for your asset then we need to eliminate those possibilities. Don’t forget to think about landscaping to make the home look very inviting and complete. Ask yourself, what else NEEDS to be done to the home and then knock those tasks out.
Finally after you have completed all tasks and have the home looking beautiful and bright, you will want to hold a open house and invite all your contacts, your realtors contacts, and the neighbors so everyone can see the improvements. The idea behind this is you want the word to start spreading about this home. This is also a great way to set a goal to have the home 100% ready for the next user. Once you have this all done you list the property with your Realtor in the MLS for slightly higher than you really expect to receive on the home to see where the cards fall. When you have done everything correctly you should find your self making more money than you originally anticipated!