Carol called me the other day looking for a contractor to help her with her long overdue ice dam repairs. We chatted for a while and eventually we were talking about the current housing market and she said how she would love to flip houses like they do on TV. “There sure are alot of bank owned properties out there” she cooed. “I think it would be fun!” She then began to mention all the invitations she receives to go attend free seminars on flipping houses but has yet attended. I then shared with her briefly of one of my own experiences being “almost” involved with one of the TV shows on flipping houses here in Boston. “Follow this formula, 3 simple steps, flip houses on the side” They all sound familiar right?
So before you go diving into the flipping house market, check out my formula for 10 things to be wary of before you take the plunge.
1. Flip houses on the side
Flipping real estate is NOT a part time job and if for some reason you are able to pull it off and by pull it off I mean make a healthy profit, then you are either lucky or not really an amateur but a pro in civilians clothing. Learning all the ins and outs and what to do and what not to do takes time. Learning how to manage the contractors and the sub contractors takes time. Learning what materials work and materials don’t takes experience. Finally these things take not only time but they take money. You are going to make mistakes and many of them (that is how you learn) they are going to cost you time and money and if you are flipping houses be prepared to spend both!
2. Finding the right deal
The flipping market is crowded marketplace filled with contractors, investors and end users all taking up space and looking for deals. The recent popularity of shows on HGTV have also glamorized the practice and has helped fuel the demand for properties to flip. This competition has lead to prices for fixer upper properties being driven up creating fewer and fewer viable options.If you are lucky or unlucky enough to be the high bidder on a particular property, chances are you paid too much. Most good properties have been gobbled up by the pros and other insiders and what is left over are the undesirable scraps for those who are unlucky enough to stumble into a bad deal. I have seen dozens of properties that have been relisted after the reality of time and money has sunk in and the hopes for a good profit or any profit for that matter has faded away.
3. Just get 3 Bids
We’ve all heard this one. It’s pretty straight forward and here is the basic rub. Call up 3 different contractors and schedule 3 different appointments and show each of them the job and get 3 neat and tidy proposals and simply choose the lowest price and away you go! Simply repeat for all the different trades involved in your project; mason, carpenter, electrician, plumber, roofer, plasterer, painter etc. and presto! you have your team of low bid contractors to perform all the work necessary to complete your flip on budget and on time! If you haven’t picked up the sarcasm yet then let me offer a dose of real world reality for you. IT DOESN”T WORK!
The fact is that it is actually very difficult to get 3 REAL bids. And by real I mean ready to perform bids. Many guys just throw out numbers, but if you were to actually say “lets go” they would disappear like a promise from a politician. Actually getting 3 solid bids for 1 trade is a something to be proud of, but the thought of getting 3 qualified bids for all your trades is simply unrealistic, especially for someone who is just starting out.
to be continued…
