Please see Part 1 of this series.
Once our bid was accepted by the auctioneers we would sign over our cashier’e check and immediately spring into action. We first would call our insurance agent and insure the property. Next, we would call a locksmith to open the house and change the locks. I was fortunate to only deal with empty houses. However, my partner once purchased a home and found it occupied. To make things worse the spouse who answered the door did not even know it was being auctioned off and was caught totally off guard. It was sad, but in that situation you offer them some money to both protect the property and move out as soon as possible.
We reviewed each home and tried to spend money where it is most visible. We did not want to spend money on roofs, energy efficient windows or garage doors. Those items do not excite the buyers as much as bathrooms and kitchens. We then have our construction team come in to bid the renovations. The bulk of our budget was spend on drywall, paint, bathrooms, kitchens, lighting and carpet. Curb appeal is important, so the final touch was a front yard landscape overhaul.
There are several things about flipping that many people may not know about. First time flippers need to consider hidden costs like utility reconnection fees and homeowners association dues in the rears. Additionally, local CC&R’s in certain neighborhoods need to give approval for exterior paint colors and front yard enhancements. This can take valuable time.
We would try to be back on the market in 30 to 60 days. The houses looked great after the makeover and were well received in the market place. We often had multiple offers and had to weigh the positives and negatives of each offer–more money for a slower, riskier close or an all-cash offer to get your money out quick.
We were fortunate not to run into any major surprises. We supervised all the work and did some work our selves. we would profit about $30,000 per home after all expenses, but we felt we earned every penny. The whole process would take about 120 days from courthouse to cash in hand.
Keys To Success
- Flipping houses is not a recipe to become an instant millionaire
- Do your homework first and don’t jump in too fast
- The business takes a lot of capital, banks don’t want to finance these deals anymore
- It’s harder than it looks, but it is still possible