Interested in renovating a property with hopes of making big bucks on the sale? Here are some basics to help you get started.
Look Who’s Talking
To give you some insight into where I learned what I’m telling you here I’ll give you a quick biopic of who I am. My family and I have been flipping properties since 2008. I became a real estate agent primarily as a result of our work in that field. We have been over renovations for new construction, existing residential properties, and an apartment complex as investment properties. Now let’s get you started on why you clicked this link!
The 3 P’s
Sometimes the best way to remember what you need to know is to keep it simple. I like to use these points to breakdown what goes into flipping a property.
3 P’s
– PEOPLE
– PLAN
– PRESENTATION
• PEOPLE – Who do we need?
1. Contractor – Price for repair, Time frame, Organizes repairs 《Licensed, crew size》 THIS WILL BE A VERY IMPORTANT. The wrong contractor can turn your investment dream into a nightmare. Make sure they have a large enough team to do your property in the time frame you need. Also, they should be using professionals licensed in their field. Get quotes from several and pictures of their work before settling in on your professional.
2. Inspector – checks for defects.
This team member will be able to review your market’s available homes for defects before you buy and check work after repairs are done. Can sometimes be done by the contractor.
3. Appraiser (opt) – Helps assess home value, determine the price.
4. Agent – Finds properties, handles listing. A good agent should be able to help you locate available properties and facilitate the buying and selling process.
5. Property Manager (opt) – Rental oversight, collect a payment, This will be needed for any rental property. You don’t want to be the first call when a renter has a problem.
• PLAN (3M) What do you need?
1. Management – Team structure. Who is the decision-maker?
In any endeavor, you need to establish who is in charge and the roles of your team. Also, as the team leader, you need to be open to the educated input of the professionals and expertise around you.
2. Market – Do your research.
Your team is gathered and you have all the expertise around you to get this done. Lean on your appraiser and real estate pro to obtain the probable property that you can obtain and how much the property after repair value will be (ARV). Rely on your contractor to give you an estimation of the cost of repairs.
3. Money – Lending, holding cost, time for repayment. Budget (+10%). Who writes the checks?
Where is your financing coming from? There are many options each with its pros and cons. Hard money lenders, financial institutions, investment pools, and personal capital are all viable options if done smartly. One good move is to leave some wiggle room in your budget because even experienced investors run into something unexpected during a flip.
• PRESENTATION
1. Property bought / Renovation Starts This is where the plans become action. Expect the unexpected but don’t worry because you planned (and budgeted) for this!
2. Determining the price of sale, Unit Rent. What changed in the market. Re-evaluation It’s been about 6 months and you’re prepared to list. Let your appraiser and agent let you know what the market is doing and how that affects your listing/rental price.
3. Staging, Helping Visualize Staging definitely helps to sell a property in 2 ways. It helps the buyer to see how space can be used and takes their eyes off of minor imperfections.
4. Showing the home Renovation complete and time to get a return!
The Breakdown
Yes, this will take some work. What you don’t want to do is go into any investment arena and think you know all there is to know on your first encounter. There will be trial and error. You will have to sort through who you can work with and what works for your team. With that said, there aren’t many investment opportunities with the return rate and market stability of real estate. May God bless you on your real estate adventures!
Gabriel V Bethel
David Lloyd Realty
[email protected]
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