Fix-and-Flip Do’s and Don’ts

Fix-and-Flip Do’s and Don’ts

Fixing-and-Flipping properties is a great way for entrepreneurs with ambition and determination to enter into an extremely profitable real estate industry. With the advent of many popular house flipping shows, (Flip or Flop, Fixer Uppers, and Property Brothers to name a few) it’s easy to see why this venture is becoming so popular. There’s drama, thrills, scandal, and heartbreak, but at the end of the day, there’s also money. Before deciding to invest your time, money, and energy into flipping a property, it is important that you do your due diligence and come to the project prepared. Here are some essential do’s and don’ts to consider when taking on a Fix-and-Flip project.

 

 

 

 

 

 

 

 

 

DO: Come prepared.

We put this first because it is absolutely essential to the success of your Fix-and-Flip venture. This includes: researching the property, finding the right crew, acquiring the necessary funding, and developing a budget and timeline. Just as important is making sure you’ve covered your bases and feel comfortable with the entire flipping process. There is a lot to learn. Don’t jump in before you know your stuff. Don’t make assumptions or decisions based on limited knowledge. In the end, you are responsible for determining the accuracy of information and best practices.

DON’T: Go at it alone.

Behind every great flipper is a great team. There are many aspects that will go into the fixing process, and you will need to seek out and hire skilled specialists that are experienced in their fields. Finding the right team will expedite the process—fixing the house and getting it to market sooner. Using professionals to do the repair work will free you up to focus on the best way to make a profit.

DO: Secure proper financing.

Fixing and Flipping a property is expensive, risky, and although there is the possibility of coming out with a profit in the end, there is still the need for cash up front. A great option for this is looking into private loans, namely hard money loans. A hard money loan deals with the property’s value, instead of the borrower’s credit. Essentially, property is used as collateral against the loan. Most hard money loans can be funded within a week, which comes in handy when you are looking to get cash to start your project quickly. When looking into financing for your flip, a hard money loan is a fantastic option—just make sure you’re looking at local lenders who understand your market. For example, if you’re in the Midwest, you should opt for hard money loans in Minnesota. If you’re on the West Coast, you should look for a California hard money lender. 

 

 

 

 

 

 

 

 

 

 

DON’T: Bite off more than you can chew.

While it can be tempting to tackle a massive project with huge earning potential your first go around, it’s also important to be realistic with your ability levels and what you can manage. Everything from the scope of the project to what repairs you can make yourself (yes, putting a little sweat and elbow grease into your project is always a good idea!) should be examined through a critical lens. Some good repairs that you should be able to manage without too much technical training include paint jobs and tiling. Leave the plumbing and electrical work to the professionals.

DO: Stick to your budget and timeline

Setting a concrete budget and timeline is crucial to the success of your Fix-and-Flip project. This will give you a solid foundation to framework the entire fix and flip process. Sticking to a budget also helps cut out unnecessary or “fluff” purchases. Keep in mind, sticking to your budget and avoiding purchasing too many extras during your flip does not mean you should be cheap. Price things smartly and correctly. Just as importantly, make sure you stick to your timeline. The last thing you want is to get held up in holding costs that eat away at your profits because you didn’t have a timeline for reference. Ideally you would want to buy, renovate and sell the property within a year.

Embarking on a Fix-and-Flip journey is exciting, and with the right sense of direction, can be very profitable. There’s a lot to learn, but following these do’s and don’ts will give you a good place to start.

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