Flipping a property, or purchasing for a quick resale profit, can be a worthwhile investment. If everything goes according to plan, it can provide a very large, profitable reward in a short amount of time—sometimes even a few months.
For people who plan to get into real estate investing, flipping properties is a great place to start, allowing you to build your expertise and expand networking connections.
Still, house flipping is risky. If you’re not careful, you could come up against unanticipated costs, higher taxes and lack of buyers. Luckily, I’ve been flipping houses for many years and can share some of the lessons I’ve had to learn the hard way. Keep these in mind as you prepare to flip your first or next home.
Stage Every Single Home
Always involve a professional stager early on, especially if it’s your first time flipping a house. They’ll help choose colors and lighting that potential buyers will look for—their expertise is invaluable to you.
It might take some money, time and energy on your part, but staging for photos and then home tours and open houses is critical. We have been able to raise the price up 25 percent and higher, just from having beautiful staging and design touches.
Professional Photography Matters
Showing potential buyers poorly composed, or dimly lit photographs makes you look unprofessional. Be honest with yourself—if you aren’t a good photographer, hire a professional. Real estate photographers will take high-quality photos that showcase selling points of the house.
I am also using a new technique of splitting the main listing photo—like as a collage. This allows somebody glancing through listings to see interior and exterior shots all at once. Because our homes are so beautifully staged, the split photos get them a lot of attention and set them apart from every other listing in the MLS and online.
Get References for Contractors
Don’t trust any contractors that claim they know how to do a specific job without getting proof first. It’s easy if you’re in a time crunch to be trustworthy of people who act like they know what they’re doing but multiple reviews and recommendations ensure you’re making the best choice.
Reach out to contractors you know and other real estate agents. When you find great people, you can continue to work with them time and time again, building a long-lasting working relationship that benefits both of you.
Be Wary of Low-Bid Jobs
In addition of getting recommendations, don’t be quick to accept the lowest bid from a contractor. Low bids usually mean a botched job and you having to hire a second person to re-do it.
In contrast, extremely high bids could mean you’re being taken advantage of. This summer, we had multiple botched jobs by one contractor causing us to miss the month of June on the market. It’s now October and the home is still on the market; it should have been sold. Beware of contractors who get you to pay for their work up front as they might not actually return to complete the job.
Work with Your First Offer
When you’re flipping houses, try to work with the first offer that comes through because it’s likely going to be your best offer. More often than not, serious buyers who are engaged in the process have spent months learning the market. They are the ones who send the first offer a seller receives on a property.
Even if it’s lower than asking price, look at all the signs leading up to it. How long has the buyer been looking? Do they have a pre-approval letter? Is it close to the listing price your real estate agent initially suggested?
These types of questions should be asked as you seriously consider the first offer on your property. It could be your best one, and you don’t want to pass that up.
Don’t Be Afraid of Bidding Wars
In a competitive market, bidding wars are common and good. If you have two seriously interested buyers, encourage and motivate them to make offers. Give each buyer a time limit in which you will evaluate both offers, for instance midnight of the same day and then allow each of them to come back with their best and final offer to be sure everyone is getting the best deal possible, including you.
About the Author
Paul Moore is the founder of Smith Mountain Homes, buying, selling and flipping homes for his clients in Smith Mountain Lake, Virginia. With this agency, he’s introduced the area to a home-ownership process that extends beyond the sale, forming a lasting relationship between all parties involved. He was a finalist for Michigan’s Entrepreneur of the Year and is always working to create a better experience for every buyer and seller he works with. Follow Smith Mountain Homes on Facebook and Twitter.