4 Tips for Flipping a House Without the Headaches
The Boston Red Sox won the World Series this past week, but instead of going to the celebration parade I went to a house flip I just finished up in Hanover, Massachusetts. I wanted to film some new videos for House Flipping School members because, to be completely honest, this particular house flip proved to be quite the challenge for my team and I.
Even with my time-tested and proven step-by-step house flipping system, some house flips still veer off track at times. Folks, in this business we are working and relying upon real humans to get their job done on time, and stay true to their word. This is true for contractors, real estate agents, interior decorators and anyone else who is involved in the project.
Sometimes us humans make mistakes, and things don't go as we planned. So even with a step-by-step house flipping system on my side, it is still important that I remain flexible and willing to adjust on the fly. You just have to take the good with the bad, and keep your attitude in check at all times.
So with all of this in mind, here are 4 tips for flipping a house without the headaches, that I learned as a direct result of my latest flip in Hanover, MA.
1-Hire the Right People from the Start
That's my brother David in the photo above, so needless to say he is a contractor I can trust 100%. After all I know where he lives!
However, we waited four weeks before starting work on the Hanover Property, because we wanted to make sure we hired the right general contractor for the job.
This is definitely not the typical way we do things around here. However the lesson to be learned is to not rush into a project and end up hiring the wrong person for the job.
Finding new contractors is important for me right now because my house flipping business is growing. Needless to say I want to be 100% sure that the new general contractor I am hiring to run a house flip knows exactly what he is doing.
It is crucial for us to have all our paper work in line and have the right contracts signed before work begins.
2-Get on the Same Page with Power Team Members
Recently I have started referring to my house flipping team as my Power Team. It's a bit more fun for me to say, but I will admit that my team is only powerful when we are all on the same page.
When I went to contract with my new general contractor for the Hanover property, my GC informed me that the renovation would be a 6 week long project. Unfortunately 6 weeks was not going to work with my budget.
In our conference room at the table I said "No you are going to do the renovation within 4 weeks."
My GC gave me a confused look but I knew that the project could realistically be done within 4 weeks. Plus I felt as if I had some negotiating leverage because this was the first project I was hiring this particular GC to handle.
After going through the details of the renovation my new general contractor ended up agreeing that the renovation could be done within 4 weeks, and we all signed the contract.
House Flipping School members can access more detailed information on the projected 4 week long Hanover renovation by watching the below video.
3-Motivate Team Members to Finish on Time
Since it is autumn here in New England I really had to push in order to get this project completed so that we could sell it before winter. As you will learn about in the below video, I really had to push to get this project completed before the cold weather sets in.
Getting your power team members motivated to finish their tasks on time is definitely an art that you want to master if you plan on house flipping full time.
Keep in mind that time is always money in the house flipping world. Your profit margin depends on your power team members meeting their deadlines.
Here are some strategies I used during the Hanover house flip to help motivate my team and ensure my profit:
- Let your contractors know that if things work out well, you will provide them with more work
- Maintain clear communication throughout the project
- Make sure everyone feels like they are being compensated accordingly for their part
- Give contractors some sort of bonus if they finish early (we will be testing this soon)
4-Buy at 70% to Leave Room for Unexpected Costs
As work progressed on the Hanover property I realized that project needed repairs that were not included in the original budget. This is why I stress the 70% Rule, because non-budgeted fixes and expenses have a knack for creeping up during the renovation.
If you do not buy at 70% or lower, you are not leaving much "wiggle room" for these unexpected costs.
For example the Hanover property had radiant heat installed throughout the house. However the kitchen, for some reason, had baseboard heating.
Installing radiant heat in the kitchen was an $1800 expense that I did not have in the budget. Yet it was an expense that I needed to spend because it just did not make sense to give the new homeowners a home with radiant heating everywhere except in the kitchen.
Installing radiant heat was just the right thing to do.
Replacing the tile floor at the Hanover property was another expense that I did not originally put in the budget. When I was developing the budget I simply did not "see" that the tile floor was cracked.
Maybe I could get away with just replacing the individual cracked tiles, but the honest truth is that the entire floor was not installed correctly. Replacing those few cracked tiles would be cutting corners and I did not want to do that.
Sometimes you have to be OK with taking a hit on your bottom line because it is the right thing to do.
This is why leaving some wiggle room is so very important.
What do you think? Let us know by leaving a comment below.