Flipping homes has become a popular occupation or past-time, inspired by the explosion of shows on TV. But is flipping a home as easy as it is on TV? Of course not.
Tons of drudgery details and bureaucratic roadblocks could enter into your house flipping, but those rarely make it into a 30-minute segment on TV. Still, flipping houses can be a profitable business if you take the right approach, but don't expect overnight success and money falling from the skies.
Here are some of the situations you will encounter along the way that makes flipping houses more difficult than it appears on TV.
Before you ever start looking for houses to flip, make sure you understand the bureaucracy you will face in the city where you plan to work. Each state, county and city is going to have different building permits, inspection processes and contractor licensing that you will need to understand.
Whenever you undertake a major remodeling of a house, such as removing walls, changing plumbing, building additions, etc., you must obtain a building permit. When you apply and pay for your building permit, that triggers the inspection process. Each step of the way you need to make sure the work is inspected, often before you can move on to the next step. If you don't, inspectors can require you to tear up work you've already completed so they can see what's behind it.
Licensed Contractor Requirements
Maybe you're pretty handy with electrical work or plumbing, but many municipalities require a licensed plumber or electrician to handle this work. Often there is an exception for owner-occupied housing, but if the city gets wind that you are an investor owner and don't intend to live in the house, the licensing requirement kicks in.
If you've already done some of the work yourself, again the city could require you to rip that part out and have it reinstalled by the licensed contractor.
Do You Know Your Contractor?
Another consideration is if you know a licensed contractor who will work with you on the project. If you don't know your contractor, make sure you check them out thoroughly before hiring someone for your flip. This means checking their license, checking references, checking that they are bonded.
The worst thing that can happen to a flipper is to have your contractor cheat you or bail out in the middle of a project. Finding another contractor in the middle of a project will consume time and likely cost extra money. Also make sure the contractor sticks to the estimate. Unforeseen problems crop up to add cost, so you should factor that in before you start.
Don't Be in a Hurry
Don't count on your house flip taking care of your financial problems in a few weeks. Depending upon the extent of the rehab, that work can take one to three months. The more work you plan to do on your own to save money, the longer the process. Some projects are slowed by the time for building permits and inspections, which is another important reason to know those rules in your area.
Then there's the delay on selling the house. Even if you sell the house quickly, which isn't guaranteed, you'll likely hold the house for 30 to 45 days between offer and closing. Doing your homework before you start also will give you the best idea about which neighborhoods sell quickly and what rehabs help you sell quickly in the price range you are considering.
One element that can speed up the process of house flipping is to have your financing in place before you begin the house search. Contact us about financing the purchase and rehab costs on your upcoming flip.
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