As we have discussed before, there are pros and cons of using a general contractor versus hiring subcontractors. However in to know how to start flipping houses for profit, its essential to control the rehabilitation spend as much as you possibly can whichever way you choose to go. In these examples below, we will assume you are managing the rehab yourself without the assistance of a general contractor.
Here are a few ways to get into flipping houses for profit by controlling your spend on the rehab, while at the same time locking in maximum profitable gains in the process.
Flipping Houses For Profit On a Budget
Using a master budget spreadsheet is a good way to keep track of the repairs needed and all the moving parts with relation to the rehabilitation. You can use the spreadsheet as a snapshot of where you are at any time in the house flip process.
In the beginning of your rehab, you should first get multiple estimates from multiple sub-contractors like electricians, plumbers, painters to get a feel and a quote for how much each part of the rehab will cost. As a rule of thumb, get three estimates from three different subs especially when you are first flipping houses for profit.
As you gain more experience flipping houses for profit, you'll start to be able to estimate how much each part of the rehab may be. Also, as you work with some of the same subs over and over again, you'll get a quick sense as to how much parts of the job will cost - just as long as they keep their prices in check and stay competitively priced.
Make Final Checks on Cost of Repairs
After you receive all your estimates and finalize the scope of work needed to be done with each of the subcontractors, its then time to plan a time line for completion.
A few tips on house flip timelines:
- Accountability: You must do everything in your power to hold all the subcontractors accountable for the prices they originally gave you. Nothing is worse when learning how to flip a house than an under-budgeted repair that blows your budget.
- Final Walk Through: Do a final walk through with each subcontractor, making sure they have not left out any small details or potential cost over runs. Tell them that you are counting on them to keep to the prices they've quoted to you. Remind them that you'll be doing this many more house flips and you'd like them to be involved.
- Two Estimates: Make sure your subs tell you about any unforeseen repairs. If there are potential repairs lurking in concealed spaces, ask them about the potential for cost over runs. If there is the potential for additional costs, get a price for both scenarios and factor those numbers into your equations. The less surprises you have when first flipping houses for profit, the better.
The bottom line is that there is no way to know every potential cost over run, it's just not possible. However when you use these tips above, you can lessen the chances that these will lessen or even eliminate your profit.
Set a Definite Time Line For Completion
As soon as you have your budgets and costs finalized with your subcontractors, now is the time to complete the time frame. Remember that whether you just started flipping houses for profit or have been house flipping for twenty years, the less time you spend between the purchase and the sale, the more money you usually make.
Here are a few things we recommend when ironing out time frames with your subcontractors:
- Subcontractor Meeting: Whenever possible, get all your subs together and have a meeting to review the entire schedule of repairs. In this meeting, you should discuss the best order for all the subs to work together in order for the project to go as smoothly as possible.
- Set the Schedule: After your meeting to discover the best logistical order for all to work, set a schedule with dates and give to all the subs and tell them you expect everyone to meet the dates that they helped determine. On that schedule, put everyone's cell phone number so they can communicate with each other. More importantly, make sure each sub knows that any changes or delays in the project are not to be made without your knowledge or approval.
- Exterior First: Begin with the end goal n mind, namely selling the house. So in order to get the house looking as saleable as possible, start the rehab on the exterior of the house first. Just some new shingles and some trim work may be enough to get some inquiries on buying the house when its complete. Make sure you place a sign out front that forwards to your phone number so you get the calls. This alone could save you thousands in real estate broker charges.
- Speed Is The Key: When flipping houses for profit, the faster the better. The main idea is to get your house flips rehabbed and ready for sale as quickly as possible without sacrificing quality. There is a time cost related to the house flip money you have gotten from other sources - so the faster you turn around the house, the more you'll make in profit by minimizing your interest on that money. Time and speed are largely dependent on the amount and depth of the repairs being done, so the more that's needed to be done, the longer the rehab will take.
- Time Is Of The Essence: If you are doing simple repairs, like exterior painting, carpet replacement, appliance updating and a bit of sprucing up of the landscaping, some landscaping, then this kind of house flip shouldn't take more than a couple of weeks. However, if you are doing an entirely new roof, new siding, interior framing, major electrical and or plumbing work, insulation and foundation repairs, a house flip like this may take two to three months...or longer! Whatever you do, make sure you factor in these kinds of repair expenses into your master spreadsheet and account for extended financing payments and carrying costs.
When learning first how to flip houses for profit, be conservative at first. Go for house flips with modest amounts of repairs so you can lock in profits. As a general rule, anything longer than two months, especially when you are first getting into flipping houses for profit, is not recommended. The more rehab work you do, the more chances for cost over runs, especially when you're new to house flipping. This goes especially true if you get into flipping foreclosures.
Manage your subcontractors tightly, make them stick to their word and control your rehab costs as much as you possibly can. In the early stages of your flipping houses for profit, this may mean being a very hands on your part. If so, then be hands on, but in the process keep your subs working and well-organized and in so doing, you'll quickly learn how to flip houses for profit.