Over the past couple of weeks, I’ve detailed the process of how to find a flip property and how to fund your flip project. Next, we are moving onto steps for a successful flip renovation. Mastering the renovation process adds value to the property and leads to a profitable sale.
If you’re considering a fix and flip for the first time, there can be many unknowns when it comes to renovating. Even if you have experience in renovation within your own home, it’s a different ballgame when you’re overseeing the renovations of an entire home. While it seems like a “fun” part of flipping, it’s critical to have a framework to follow.
Before getting your hands on the sledgehammer, I recommend setting a plan. The reality is, renovation is where the majority of possible problems can come from (possible, not certain). That’s why your plan needs to be solid with the most critical parts being budget and schedule. It’s up to you to set expectations and create a plan because the people around you won’t be as invested in those things as you are. Without a strong plan for budget and schedule, you don’t have a guide to get the house back on the market, which could mean a delay in the sale.
What do you need to have to start? You may be surprised
When I wanted to start house flipping I knew just enough about renovations to be dangerous. That translates to: I had watched flipping shows on TV. I knew a few basics but taking out a wall and re-locating a kitchen? Absolutely no knowledge..
If this sounds like you, don’t worry. You don’t need to be an expert. I promise. You just need to know how to hire the right people to get your renovation completed from start to finish.
My experience in house flipping has taught me the critical steps to a successful flip renovation. We’re going to talk about five guidelines to use to achieve a great renovation, and how to efficiently execute each step.
Now let’s dive into 5 steps to help guide your flip renovation.
Step 1: What to Do? Renovate or Update?
Some sources say that house flipping is easy, but I would add an asterisk of caution. If it was easy, everyone would be able to do it successfully, and we know that is not quite how it goes.
The truth is, every property is unique and values vary from neighborhood to neighborhood. Your primary goal is to think about how to maximize your return on investment (ROI) without doing too much or overspending. One of the biggest mistakes of both new and experienced house flippers is going over budget.
That’s why step one to the best flip renovation is deciding which type of project your flip will be. Is it a renovation or an update? Ideally, this is something you would have decided when you were looking at the numbers for resale, but some homes may offer the opportunity for both. Confirm your plan prior to starting to make sure your original plan still makes sense.
Keep in mind that a renovation is when you remove what’s there and replace it with something new. For example, in a kitchen, that would include removing all old cabinets and fixtures and installing new cabinets, countertops, fixtures, and appliances. It may also include removing walls to create an “open concept” floor plan.
Alternatively, an update would keep much of what is already existing in the home. These projects would consist of a lot of paint and flooring for the changes. Replacing high-use items like sinks, countertops, appliances, and light fixtures will also add value. The overall layout and spaces will stay the same in an update.
Choosing between a renovation or an update comes down to budget. If the existing cabinets and fixtures are in good condition, it’s less expensive to keep them, clean them up, and paint. This will help maximize your profit. If you have the budget or the area supports a renovation, then it will help increase the value of the house. Either option may work, and you can incorporate ways to sell for more with both.
TIP: Even if you think you want to keep the cabinets, always compare the price of cleaning, repairing, and painting to replacing. You may be surprised that the time and labor for painting is comparable to the cost of replacing. Replacing them will potentially save time, too.
Consider improvements that have the best ROI. In older properties, renovate the kitchen because the area won’t have the layout that modern homes have. After the kitchen, look at the bathrooms. Changes to these two areas will add significant value.
A flip isn’t necessarily about testing everything out. Sometimes adding fresh pain, changing out the flooring, and swapping out light fixtures can add enough value while creating an opportunity for profit, too. Remember, not every room needs to have a major overhaul.
Step Two: Hiring Contractors
For those who don’t have renovation experience, hiring a contractor is the best way to ensure your renovations are completed according to the required building code. Finding a contractor doesn’t have to be difficult. I suggest always starting with referrals from friends and family. Ask who they know, if they have had positive experiences with any contractors in the past, and you may even ask about cost.
Real testimonials or knowledge of someone firsthand who is a contractor is the easiest place to start. Another option is looking online, where there are tons of ways to connect with contractors. You can see projects, read reviews, and research companies. Websites like Angie’s List or Home Advisor can provide potential leads. Always vet any contractor thoroughly. Get multiple bids and compare them carefully. All contractors should be bidding on the same scope of work you provided so that all the bids are comparable.
Beware of thinking the cheapest bid will end up saving you money; It could actually cost more money to make up for poor work. Low bids often increase the project going forward as well, leaving you with a higher cost than planned.
You’re going to have to plan out the schedule to complete the entire renovation and work with your contractor on the details. An experienced contractor will be able to review the schedule and make suggestions. Make sure you’re also clear on who will be responsible for materials. If you’re going to provide lighting and tile, you will need to know the dates those items are needed on the job site.
As important as the budget is the timeline, as part of the contract, you will want to include both a start and completion date. Ideally, your contractor will be able to complete renovations on schedule, but they could encounter situations that cause delays. For example, they might find additional repairs needed behind walls or items during construction that need to be addressed.
If this happens to you, don’t worry. Stay calm and figure out the proper solution with your contractor. It may increase costs, but the alternatives will cost much more. Trying to sell a house where you started and then walked away isn’t going to yield a profit. If you ignore the problems, it may cost you a sale when a buyer’s inspection reveals the issue. Bottom line: Take care of it, it’s worth it!
At the end of construction, make sure you complete a walkthrough. This should be done before the final payment is made. You will confirm all work was completed and the house is ready to be shown to potential buyers. This is the time for paint touch-ups, caulking, and checking doors to make sure they open and close properly. Look at the house as though you are a buyer and if it looks like something needs attention, make sure it’s addressed.
Step 3: Stick to a Schedule and Budget
As renovations get underway, it’s going to be exciting. There seems to be a lot happening in the beginning and then suddenly, things will slow down a bit (or a lot). Don’t worry, that’s the nature of construction. This is where it’s key for you to continue to check in on the project, especially if you hire a contractor to oversee the project.
When you are starting out and working with someone new, you’re still managing the project. It’s up to you to ask questions and don’t be afraid to ask a lot of them. Another recommendation would be for the contractor to let you know when inspections are scheduled. That way, you can add that to the job schedule and know how things are moving along.
Delays are part of the process and are often out of your control, but being aware of when and why is essential.
Along with your schedule, you will have a budget for every job that includes materials and labor. Your budget must be firm to maximize ROI and get the biggest profit. Your budget will inform many of your decisions, so it’s a critical step in completing the best flip renovation possible.
Making changes along the way is another big mistake that I often see people make. These unexpected re-routes not only delay the project but can cost a premium. Do your best to cover all the work in your budget from the start. If there is something small you really want to change, that may be doable but deciding to remove a wall after the drywallers have finished would be extremely difficult.
Step 4: Selling For a Profit
The final step to flipping success is selling. While you’ve spent several weeks getting the renovations complete now is not the time to stop. Staging is key. And in fact, it is so important that I recommend everyone include it in their budgets from the very beginning. Another must? professional photographs. For many buyers their first showing is online when viewing these photos.
Having a good realtor is also key when it comes to your listing. They should be able to assess the activity of the local market and make a difference between a quick sale and a house that sits with no offers. They will help you with pricing and represent your interest when working with buyers. They will also negotiate on your behalf when it comes to pricing, concessions, and inspection requests.
Though you will pay a commission, they bring expertise to the process and can potentially secure you a higher price and more favorable offers.
Step Five: Reflect and Repeat
I know, you’ve gotten through a flip and can’t wait to move to the next. Though I find step five to be critical to your process. Along the way, there’s a chance something will go not quite the way you intended. Don’t get discouraged because you’ll learn that all problems have a solution. When something is new, it just may take a bit more to figure out what that solution may be. Learning by doing is always the best educator.
Fix and flip isn’t for everyone, but anyone willing to take on the challenge will learn how to be successful. With these five steps, you will see your way through your first flip and learn lessons along the way to move forward on your fix and flip journey.
With every single project, you will find your knowledge and skill growing, soon you may pivot to larger projects or different neighborhoods. The choice is yours to make, so get ready to take control of your flipping future!
If at this point you’re considering your next project, congratulations! You’ve just learned something new about yourself and what you’re capable of. As you continue to gain more experience, taking on larger projects may be on your horizon. These will feel so much more possible with the experience you’ve built.
Ready to take that next step when it comes to flipping?
Here are some resources I’ve put together to help you get the information you need to move forward on creating your flipping life.
Make sure you have the Fixer Upper Checklist so you know which areas are key to added value in a home.
If you are interested in learning more about the House Flip Blueprint course go here.
There are several videos available on finding houses, renovations and funding on YouTube. Check out your favorite flipping topics and new videos weekly!