With the popularity of HGTV television programs that show how lucrative the house flipping business can be, it’s no wonder more and more people are becoming house flippers. Thinking of taking a house an adding to its value with renovations before re-selling it? Here’s our free house flipping guide for investors!
After you have put in some sweat-equity, it’s exciting to re-sell the property for some extra cash in your bank account. However, you have got to go into that kind of a transaction with your eyes wide open. You need to be well-aware of what is going to give you the best return on investment so that your flip doesn’t turn into a flop.
CHOOSING A SMART LOCATION FOR YOUR FLIP-HOME
First and foremost, you have got to choose a good neighbourhood for your flip. You can renovate a house and make it look phenomenal, but if it is in a terrible location, nobody is going to want to buy it.
Consider neighbourhood features like the school district, neighbourhood traffic, and comparable homes that have sold in that community recently. Visit the area and get a general feeling of the area. Go with your gut. Would you want to live there with your family?
DECIDE WHAT YOUR BUDGET WILL BE
What you’re looking for is the diamond in the rough. You’re looking for a property that you can manage to fix up and then sell for a price that is comparable to the price of other homes in the neighbourhood. Don’t expect to dump a million dollars into the project and then re-coup that if none of the other homes in the area are selling for that much.
Your budget should include some leeway for unexpected expenditures. Heaven forbid you find out during the renovations that the house needs a new foundation or a complete re-wiring job. Be aware and ready for potential expenses that you were not ready for. Always have a contingency fund for such surprises.
CHOOSE YOUR EXPENDITURES WISELY
Remember that flipping a home does not necessarily mean you need to install travertine floors or marble countertops. Sometimes just a few simple updates and fresh coat of paint are all it takes to give a home a new life. So spend your money where it counts and try your best to spend your money wisely.
More often than not, it’s the kitchen and the bathrooms that sell a flipped home. A lot of buyers don’t want to be bothered with large kitchen or bathroom renovations, so if you can do that work for them, your home will attract more interest.
Remember that you want your upgrade choices to be appealing to as broad an audience as possible. Neutral paint colours throughout the home, simple tiles, and white bathroom fixtures are typically the most appealing. You should not impose your own personal style into your flip-home either because buyers will have trouble imagining themselves living there.
When you keep things neutral, home buyers will feel your home is turnkey-ready and that they don’t need to make any changes before move in day. That’s your major objective when it comes to home-flipping.
TOP 5 RENOVATIONS TO GIVE YOU BEST RETURN ON INVESTMENT
1. THE KITCHEN
Keep it classic and neutral. Don’t spend a bundle on the latest trends when remodelling because buyers may shy away from gimmicks that look dated over time. Remember, you may not have to renovate everything in the kitchen. If the cupboards are in good shape, perhaps a coat of paint will bring everything up to date.
2. THE BATHROOMS
This is another high-traffic area that buyers like to see isn’t run down or dated. Updating the fixtures or cabinets can give the bathroom an entirely different look. If the bathroom isn’t laid out well, you may consider the larger job of moving the plumbing to a better location or opening up a wall to make it more spacious.
3. THE FLOORS
Nobody wants to live in a house with used-up carpets, broken tiles and scuffed up hardwood floors. Replacing the flooring in your flip-property makes the home feel fresh, and it makes a good impression. Many buyers like hardwood or laminate floors in the living spaces. Ceramic or porcelain tiles in the kitchens and bathrooms, or plush carpet in the bedrooms are also quite appealing.
4. THE WALLS
The walls are probably the easiest to tackle and making sure they’re in great shape is a good way of adding some appeal to your home at listing time.
Freshening up the walls with a nice clean coat of paint makes the home feel new to potential buyers. Try to keep the paints neutral. And if you’re not the tidiest painter, it may be better to hire a pro to do the job for you. Most local painters are quite affordable.
5. INCOME GENERATING SUITES
Is there a shortage of rentals in your area? Are students looking for a smaller space to rent in your neighbourhood? You may consider creating a separate suite in the basement or above a garage that could bring the new owners some residual income potential. Do some research (or ask your REALTOR®!) if this is worth your while. Any income-suites you build will need to be up-to-code so before you jump in to the renovations, get all your information first.
Our recent guide on How To Sell Your Home for the Most Money Possible is a great resource that will help you determine what your home is worth, and how to properly set the sale price during the real estate listing process.
HIRE A REPUTABLE CONTRACTOR
You might be quite the handy-person, but there are some jobs where you should still hire a professional for. It seem like a great idea to knock out a few walls or try to build a fabulous open-concept floor-plan, but should you?
If you take out a load-bearing wall, you’re not only endangering yourself, but you’re endangering the buyers that will live in the home. Hire a contractor before making any major renovation decisions. A contractor will ensure things like structural changes, electrical changes and the plumbing are all up to code and use the appropriate permits. Buyers like to see that all renovations were done properly and that means scheduling periodic checks with a local building inspector.
HAVE A REAL ESTATE AGENT FIND BUYERS
When you’re finished with all the renovations, hiring a real estate agent will ensure your home-flip is given maximum exposure to as many buyers as possible. Your agent will provide you with professional photography and video tours of the home. They will give you advice on what the list price should be, and provide a strategic marketing plan to get that home sold. Once you sell, you can be on your way to your next flip!
THE TAKE HOME
Flipping a house can be a very worthwhile venture if you spend your money wisely and plan in advance. The first step is to ask your REALTOR® for help with finding that diamond in the rough. You can also find the right flip-home by doing a simple property search. Happy flipping!
