Everyone seems to love the real estate flipping reality TV shows. An adorable young couple buys a derelict home, puts a little lipstick on that pig, and sells it for big bucks. Usually the couple makes a pretty penny and manages to look completely relaxed throughout the process. Oh, the magic of TV! Flipping in real life is infinitely more complicated than on cable. Here are some top tips for fruitful flips to increase your chances of raking it in without losing sleep.
Don’t plan to be the most expensive home on the street or in the building.
Unlike in other areas where we often aim to push boundaries, for risk averse home flippers, you want a pattern established. Psychologically, buyers need to justify why they are paying sky-high prices for real estate. The best evidence is comparable home sales. If you are breaking the top price point for a street or building, you will likely get less than you would have if there was a comparable home sold for around the same price in the last year.
Design matters.
It may seem silly that people will pay more for a stylish backsplash or adorable breakfast nook, but this is the reality. People are swayed by well thought-out style and trendy touches. If you are hoping to do a flip but have no interest or flair for interior design, consult a professional. The return on your investment particularly in a competitive market is assured. Make sure your design ideas are tailored to a wide pool of potential buyers and match the area’s demographic. When you are getting ready to sell your project, ensure that it is dressed up and effectively marketed. Eliciting an emotional response from buyers with design, staging, and other creative marketing tactics puts money in your pocket.
Understand the scope of your project.
Often with flips you can score a bargain by purchasing a property that’s in pretty 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, make sure you have professional advice and a complete understanding of the scale of the project. For example, if you’re paying peanuts for a semi because the owner’s five cats have urinated everywhere, know what you’re getting into. Beyond replacing the drywall and floors, you may actually have to replace the floor joists to get rid of the smell.
Budget for unexpected issues.
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 can make an educated estimate from the outset, you don’t really know the full scope of a project until you take down a few walls. Asbestos, mould, and hidden structural issues are examples of defects that can reveal themselves during the demolition. Make sure that when you’ve calculated your profit, your bottom line can weather a few surprises along the way.
Factor in the timeline.
The first part means factoring in significant carrying costs while you are waiting for permits. Depending on the scope of the project, these can take anywhere from a few months to closer to a year. The second consideration with timeline is changes in the market. The longer your project takes, the greater the chance that the market will shift beneath you. Ideally you want to buy and sell in the same market conditions. Your 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 a must.
Forget everything you saw on TV (except maybe some creative design ideas).
Nothing about the reality show’s timelines, budgets, or execution are real. They are scripted shows and often the construction crews are working with discounted labour in exchange for advertising. If you are hoping to fully renovate your three-bedroom home in four weeks with a $30,000 budget, you are dreaming in technicolor. Building in Ontario has 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, which is one of the most substantive costs of a project.
Flips can have a big payoff when executed properly, but 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.
