How to Flip a Residential Property & Make Money

Five Steps to a Successful and Profitable Real Estate House Rehab

Oct 16, 2009

Time stands still for no man, especially a real estate investor involved in a residential property flip. A successful house flip can profit by following 5 critical steps.

There is possibly no greater business activity where ‘time is money’ than with house flipping. The entire focus in a real estate rehab project is to buy it low, fix it cheap and sell it fast. Funny enough, the single most critical element of a flip that catches even experienced investors off-guard is the unexpected delays and events that affect the timeline and end up costing money.

Most investors tend to be self employed with an entrepreneurial spirit. As such, they also have big dreams that march to the beat of a high speed drummer. In most cases, just by taking a step back, taking a deep breath and making sure all the tedious work is done upfront, a schedule can be adhered to and in some cases; a project can be completed ahead of time.

Step 1: Planning Must be a First Priority

The first all important step to any successful flip is diligent planning. From the moment that the offer to purchase is signed and submitted, the real estate investor should already be planning out the renovation process; deciding what work will need to be completed, how long it will take to complete the project and which subcontractors will be the best choices to complete the various remodel tasks.

Next, call the desired contractors to find out how the property flip plan fits into their schedule. If they are too busy to work within a pre-arranged schedule, it is imperative to look for other contractors who can.

At this stage, a smart investor also starts to flesh out rough renovation sketches and material checklists. The goal in the planning stage is to get as much of the groundwork done as possible so once the project is underway, everyone involved with the rehab project can hit the ground running.

Step 2: Organization is Second Only to Planning

With proper organization and documentation of each phase of the flip project, all parties are kept abreast of events and it is easier to stay on task and schedule. The best approach is to get a big piece of poster board and lay out the work calendar, including which contractors are coming on which days, which work is being worked on and deadline dates that have been agreed upon between the investor/owner and the various trade contractors and subcontractors.

As the work is completed, cross it off. It truly is amazing how good it feels to see work finished, but it really does help to keep everyone working towards completion dates and keeps morale very high – always a good thing on a flip project.

No matter the size of the property flip project or the importance of the detail, purchases should never be left until the last minute or be treated as insignificant elements of the venture. The materials needed by contractors and construction workers to finish the work on time is critical as is securing the desired products to make the finished house beautiful, and achieve the highest selling price upon resale.

Waiting until the eleventh hour to purchase materials could be problematic. Tiles that were selected in the planning phases may be out of stock a few months later, or worse has been discontinued. It is not unusual to wait 6-8 weeks for custom kitchen cabinets, high end hardwood flooring, or luxury bath fittings and fixtures. When you plan, be certain that items will be available when needed, and always order on time and whenever budget allows, ahead of time.

Step 4: Be An Active, Onsite Flipper

Even when the entire job is being done by contractors and a competent project manager has been hired, it is important to be on site often to keep the flip progressing as planned. There are many flippers who leave the details to the project manager and although this is fine, a wise real estate investor always stays in charge of every situation, never letting anything get away or out of control.

After all, at the end of the day, the money invested and the property are owned by the investor and the outcome of the project affects the financial outcome of the flip resale. How that real estate investor manages each property flip may be the difference between profit and loss.

Step 5: Stay On Task, On Budget and On Schedule

Timing is everything on a real estate investment, especially when the desired result is flipping the property quickly and for a decent profit. When a schedule cannot be kept, it costs the investor significantly in money and opportunity. A few months over schedule, unplanned mortgage payments and house maintenance costs become an issue for many flippers.

Additionally, if scheduling was designed to intentionally resell the property at a time that is known to be hot, that ripe opportunity may be missed and end up holding a property for months longer than anticipated. Planning ahead, documenting progress and staying on top of the job will yield great results.

The copyright of the article How to Flip a Residential Property & Make Money in Home Renovation/Repair is owned by Tracey Drake. Permission to republish How to Flip a Residential Property & Make Money in print or online must be granted by the author in writing.