Have you ever wanted to quit your day job and go into the exciting world of real estate investing? You’re not the only one.
Many Americans these days, with younger generations aging, are turning to real estate to make additional income. Now, flipping a property is very involved. It takes hard work, impeccable timing, and business acumen, to say the least. You have to be on top of your game.
Whether your first flip is a total investment of $50,000 or you have a little more to work with, you’ll find this brief guide to house flipping useful. Here are seven useful tips for beginners to fix and flip like the pros.
Your budget is golden for your first flip. If you’ve secured the finances for your project, you should be good to go. But the caveat here is that you need to stick to your budget. Setting aside a fund for unexpected repairs and costs is a must in the amount of 10-20% of your total budget. Generally, as a rule, “If a home’s ARV is $150,000 and it needs $25,000 in repairs, then the 70 percent rule states an investor should pay $80,000 for the home” accouding to investfourmore.com. This approximate calculation is a good general rule of thumb.
Here is where enforcing the budget comes into play. You have crunched the numbers and found that with the purchase price and rehab costs that you have enough to do it. Cutting on costs has various factors including how much actual labor you do yourself, the cost of the labor you have to hire, the costs and discounts you find on materials, and above all, your ingenuity and ethic. You have a set budget, including funds for landscaping (about 10% of your overall budget), you have an emergency cushion fund for unexpected costs, and you have money for all your bills on top of renovation costs. Luckily for you there is Center Street Lending.
Materials and manufacturers
The cost of the materials you choose to renovate with are a huge factor when it comes to the finished overall look of the space. If the craftsmanship is solid, then using whatever cohesive design elements are available in the right quantity can be achieved at a great price. There are various remnant stores, second-hand stores, and outlets that provide deep discounts. There are rewards cards programs at every Home Depot, Lowe’s, Harbor Freight, and almost any design store out there. Establish relationships and brand loyalty with your favorite manufacturers and these bonds can be turned into friendship discounts. Dont be afraid to really start networking.
Shopping at discount prices
Similarly to establishing connections with vendors, it’s important to get the best deals of materials and supplies whenever possible. If you know anything about your average contractor, it’s that he frequents all the home maintenance stores, Wal-Marts, and the hardware stores on a regular basis. If you can’t find the discount paint section then you might wanna ask somebody. Paints that are ordered and never picked up go from 50% off and the shades are not half bad. Employ the re-use stores, big box stores, and anywhere you can get the best price. Every dime counts.
Contracting & labor distribution
The bottom line here is that the more work you can do yourself = the more money you will save. If you don’t do roofing but find some unexpected water damage and a patch of roof that needs repair, you will have to hire these services out. If you plan to have multiple workers on the job to help you, then you need a budget line item for their pay. Expert contractors calculate every last detail of the budget down to the cost of a box of screws. Just make sure you’ve accounted for everything down to the door nails.
Risk vs. reward repairs
If you are in a high-end neighborhood or even close to one, it’s a good idea to go with what everyone else is doing around you. Granite countertops are sometimes a must. Look at your comps and decide to go a little bit beyond the norm. Though some homes are perfectly fine with laminate counters and minimal paint colors, others require a special touch, and this will come with time. Spice up your rehab with home staging, which can be accomplished on a minimal budget depending on the number of rooms to be decorated. Don’t blow your budget on costly renovations and stick to the cosmetic work.
Finding the right flip home
The point above again continues to flow onto the next tip; finding the right home is often about finding the cosmetic-only projects. Whether you found this project on an online database, through a realtor, or at auction, there are different strategies to consider when moving forward with the purchase. Is the price right? Are the repairs achievable within 8-10 weeks tops? How is the real estate market treating sellers? These are all questions we have to ask. The right home will check all the boxes, but also have the right feeling. This will come with time as well.
For all your private lending needs to finance your next rehab project, and financial assistance, contact Center Street Lending today. Or call us today at 800.208.2976. We can help you finance your flip.