Posted in I have bought and sold several properties in the past few years myself, and have helped clients finance several other flips, and have seen what works and what hasn't.
1. Most people do not make money flipping houses, despite what they say and what you may have seen on tv. To start, you must keep an accurate spreadsheet detailing every last penny you spend. Don't forget to include legal expenses, land transfer tax, interest costs (both mortgage and interest you might have to pay on a credit card/line of credit), utility/heating costs, etc. Depending on your project timeline, this will add at least $5k to your cost base. If you are planning on using a real estate agent to sell, be sure to account for 5% of the selling price in your figures. Time is money! Depending on the time of year, it will cost you between $40-$50/day to own a property so stay focused.
2. You can always fix a house, but you can't fix a bad location. Many of my clients have bought potential flip houses because they were 'cheap', but if the house is in a bad area of town you might have trouble attracting a more upscale/financially capable buyer. Buying the worst house on a good street is a better philosophy.
3. Get an experienced team of professionals in place. Although I have great respect for the true jack of all trades, you can save significant amounts of time (which equates to money) by farming out many jobs such as electrical, plumbing, etc. to specialized trades.
4. Get the proper insurance. Most insurance companies will not insure a home that is under renovation and not occupied (or more specifically one you do not plan to occupy). Make sure to get a proper builder's risk policy - I can help introduce you to a great local insurance broker if you don't have one already.
5. Remember - it is not your house. Fix/upgrade all the major systems of the house to make sure your future buyers have no issues (roof, plumbing,electrical, foundation, furnace) but watch your pennies on the finishings. As long as a house looks, feels and smells new you don't have to spend tons of money to attract a suitable buyer.
6. Call Craig for your financing. Depending on the state of disrepair of the house, many lenders may not even want to touch the project. I can help save you time and frustation by setting up the financing for you.
Good luck, and remember - measure twice, cut once.
