Once you identify a flip house and have it under contract, there are a few actions investors can immediately take. Along with being an active realtor in NW Ohio, I have experience with three live-in flips, one fix and flip, and as well as owning a few income properties.
Before making an offer on our fix and flip investment property, I addressed the following items:
- Determined the property had good bones and potential to add value that buyers would like
- Estimated repairs and costs needed and analyzed the numbers to ensure our profit goals were attainable with the ARV (after renovation value) and expenses
- Complete a market analysis – including a review of cost per square foot in the neighborhood
- Determine project timeline – how long will it take to get the property ready to sell. We calculated 4-6 months, just in time for Spring
5 Actions for Investors to take Before Closing on a Flip House
1 | Get to Work Before the Close Date
There is a lot of work that goes into flipping a house and it starts right after the offer is accepted. It generally takes 30-45 days for a property to close with conventional financing and you want to have as much of the renovation planned as possible within that time.
There is always a chance that the deal could fall through and your planning could be for nothing, but it is better to get a head start and have contractors scheduled for the day you receive the keys to the house.
When we closed on our fix and flip property, the very next day we had a new roof installed and trees removed from the backyard.
2 | Create a Punch List of Projects to Complete
I like to create a detailed spreadsheet with every project we want/need to complete at the flip house. I include multiple columns – Projects, Estimated Cost, Actual Cost, Date Complete, Notes. You want to be as detailed as possible and consider every expense, you will be surprised how quickly it adds up.
I make sure to consider materials and labor and make lots of calls to various contractors/sub-contractors to compare rates. It can be easy to get overwhelmed with managing such a large project, but tracking it all on a spreadsheet really helps me to stay focused and on schedule.
3 | Evaluate Budget & Eliminate Projects
As the expenses start to rise, I always end up cutting some of the projects that affect our profit margin.
For example, I really wanted to build a little locker system in the mudroom/laundry room. To save on costs, I decided to add hooks on the wall and stage the room with a long bench below. This is one alternative we chose when going through our original plans for the house. You can also see what projects you can take on yourself to save money on labor.
Here is another project that we cut. We played around with the idea of adding a dormer to one bedroom and making improvements to the screened-in porch. Unfortunately, these improvements would not increase the ARV enough to justify these projects. Flipping houses can be fun, but for those investors who love the design aspect, it is a real challenge to balance aesthetic and profit margin.
How beautiful is the sketch (by Jeff Unverferth) of our fix and flip house?
*For more inspiration, check out Jeff’s beautiful Airbnb, the Gas Lantern Cottage.
4 | Plan the Design & Cosmetic Updates
One of my favorite parts of flipping houses is designing a home to function for modern families. My goal is for potential buyers to walk into the house and be wowed by the design. There is a fine line between appealing to as many buyers as possible and creating a boring space that looks like all of the other flip houses.
For our fix and flip house, I chose earth tones that were neutral but also didn’t feel flat. Creamy white walls, white shaker cabinets, wood floors, gray-green accents – each room felt alive and could accommodate many different aesthetics.
Creating a design that complements the original architecture of the home while giving it a modern feel is always rewarding and exciting. Kitchens and bathrooms are very important to buyers, so we always put a lot of focus on these areas.
It is important to understand your potential buyer pool and what they appreciate about homes in the area. For example, the homeowners in one neighborhood really appreciated the historic details of the homes. With this in mind, we decided to keep an original bathroom that needed a few small updates. The blue tile, 1950s bathroom gives the home personality and makes it unique.
5 | Schedule “Must-Have” Renovations
What renovations must be completed at your flip house? These projects usually affect the safety and integrity of the home. For example, replacing a leaking roof, replacing the furnace, removing trees that ruin the foundation, etc. These are big renovations that generally require the hiring and scheduling of a professional.
There will also be renovations that you will be tackling yourself and you can begin to list out each project and when they need to be completed. Curb appeal is very important when selling a property and I knew I could clean up the flower beds and paint the exterior on my own.
Once you close on your flip house, it’s off to the races! There will be times when you are overwhelmed or stressed, but the exciting part is that you actually took a chance and aren’t sitting on the sidelines. I am a big believer in taking calculated risks. Throughout my life, I have learned how important failure is in my life and how much a learn and grow from experiences where I think I have “failed”.
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