Everyone seems to love home improvement reality TV shows where an adorable young couple buys a derelict home, makes a few renovations and aesthetic changes, and then sells it for big bucks.
Usually, the couple makes a pretty penny and looks utterly relaxed throughout the process.
Oh, the magic of television!
In reality, flipping a home is infinitely more complicated than on cable. Here are some tips for flips to increase your chances of raking it in without losing sleep.
- Make it Comparable
- Focus on Design
- Be Realistic
- And Then Add More
- Establish a Timeline
- Forget TV
Make it Comparable
Don’t plan to be the most expensive home on the street or in the building after the renovations. Unlike in other areas where we often aim to push boundaries, for risk-averse home flippers, you want someone to have reached a specific price point before you.
Psychologically, buyers must justify why they would pay a sky-high price for a property. The best evidence is comparable home sales. If you are breaking the top price point on a street or within a building, you will likely get less than you would have if a comparable property sold for around the same price within the last year.
Focus on Design
It may seem silly that people will pay more for a stylish backsplash or adorable breakfast nook, but this is the reality. Well-thought-out styles and trendy touches sway people. If you hope to do a flip but have no interest in or a flair for interior design, consult a professional. The return on your investment, particularly in a competitive market, is assured.
Then, ensure your design ideas are tailored to a wide pool of potential buyers and match the area’s demographic. When you are ready to sell your project, ensure it is dressed up and effectively marketed. Design, staging, and other creative marketing tactics can induce an emotional response from buyers, putting money in your pocket.
Be Realistic
Understand the scope of your project. With flips, you can often score a bargain by purchasing a property in rough shape. Other potential buyers are too scared of the amount of work, and the eyesore factor impacts the sale price. Go into this purchase with your eyes wide open. If you are new to renovations, ensure you have professional advice and a complete understanding of the scale of the project.
For example, know what you’re getting into if you’re paying peanuts for a semi because the previous owner’s five cats had their way with the home. Beyond replacing the drywall and floors, you may have to replace the floor joists to eliminate the smell.
Budget. And Then Add More
Once you’ve got a good understanding of the scope of your project and a reasonable budget to match, add a healthy buffer. While you or your contractor can make an educated estimate from the onset, you only know a project’s entire scope once you remove a few walls.
Asbestos, mould, and hidden structural issues are defects that can reveal themselves during demolition. Make sure that when you’ve calculated your profit, your bottom line can weather a few surprises along the way.
Establish a Timeline
The first part means factoring in significant carrying costs while waiting for permits. Depending on the project scope, these can take a few months to a year. The second consideration with a timeline is changes in the market. The longer your project takes, the greater the chance the market will shift beneath you. Ideally, you want to buy and sell in the same market conditions. The dream scenario is buying low and selling high, but it’s impossible to time the market or get that lucky every time. Practically speaking, you want to buy and sell in the same market conditions, so keeping a project on a tight schedule is necessary to improve your profit chances.
Forget TV
Forget everything you saw on TV (except creative design ideas!). Nothing about the reality shows timelines, budgets, or execution is accurate. They are scripted shows, and the construction crews often work with discounted labour in exchange for advertising. You will be disappointed if you hope to fully renovate your three-bedroom home with a $30,000 budget in four weeks. Buildings in Ontario have costly weatherproofing, fireproofing, and waterproofing considerations that some southern locations aren’t required to abide by, not to mention differences in the cost of labour. That is one of the most substantive costs of a project.
Flips can pay off big time when properly executed, but they are not for the faint of heart. Remember that they can be a lot of work, stress, and risk, so get professional advice to supplement any blind spots you may have. With open eyes and smart budgets, you can succeed!
