Before you make a decision to become one, be aware of the whole process from start to finish and do not make mistakes that many newbies have in the past.
The success of your project depends on market trends and insight into the growth of specific neighborhoods. Ask your Realtor for suggestions of which neighborhoods to target and then have them complete some statistical research for you, going back at least two years, to determine where the best margins reside. It can take time to find the right property, so keep your emotions and expectations in check and don't rush yourself.
Here's a review of some of the mistakes that some of my previous clients have done so we can learn from them:
Mistake #1: Bringing emotions into it. This is a business, take a breath and make sure you’re making the right financial decision.
Mistake #2: Not studying the comparables. Check the sales of comparable properties. The market can change drastically in a few months.
Mistake #3: Pretending it’s going to be easy. We often watch fake budgets, fake sale prices and fake timelines. Be prepared to work your butt off.
Mistake #4: Ignoring your budget. Plan ahead – with realistic numbers – and stick to it. Every penny counts.
Mistake #5: Choosing product over location. Sometimes investors fall in love with a property and ignore its proximity to busy roads, train tracks, highways, hydro towers and other rightly stigmatized ear- and eyesores.
If you’re in a competitive market, there are a few key things you can do to try to beat competing flippers in a bidding war:
1. Always be financially prepared to purchase a property. Get pre-approved and know your top spending limit. You’ll want to keep your offer as clean as possible.
2. Be your own general contractor. By acting as your own general contractor, you will not only save money, but you’ll also be in full control of the renovation process. Start building a database of skilled trade workers and do some homework on the level of quality and service they provide. Don’t be afraid to ask for referrals to verify that their workmanship is up to your standards. Use online services with real reviews and photos of a contractor’s work.
3. Only hire licensed contractors who are insured and who won’t take any jobs until they possess all of the proper work permits. You should also keep detailed records of your communications with each contractor.
Flipping homes can be lucrative, rewarding, emotional and stressful – all at the same time. Prepare as much as you can prior to your first purchase and allow yourself enough time and money to account for unforeseen issues. (Don’t forget about that pesky capital gains tax, either!)
Written by Anna Belyntseva (anna@jj.team)