Flipping houses is both rewarding and risky. When done right it can be great fun to watch a dilapidated house transformed into a modern and desirable home. The neighbors love you for helping their neighborhood increase in value. When done wrong, stress abounds, sleepless nights and steep losses are what you can expect. Trust me when I say you don’t want to experience the stress of a flip gone wrong!
Prior to purchasing a house, we give it a quick inspection walk through and take pictures of all the areas we think will need addressed on a flip. We will prepare our insurance agent with the details of the house and what our plans are for it. She is very good at taking care of our insurance needs. There are many different kinds of policies and you need to get the right one. (Reach out to us if you need a referral!) Once purchased, we will spend more time in the house going over what needs done. Then, we create a detailed scope of work. We meet our contractor at the house and he will help us create the scope. Often, he will see things we missed.
We have several contractors we work with. Many of them we have been doing business with for a long time. Some of the issues we have when dealing with contractors are 1. Speed 2. Quality and 3. Price. Most will say you have to pick two of those. You can have a contractor that is fast and good quality, but he will cost more. You can have a contractor that is fast and has a great price, but he may be slow. Maybe your contractor is quick and priced right, but their quality suffers. Having a detailed scope of work will help with some of these challenges. Having a contractor’s agreement will save many relationship headaches. We like to get all of our contractors to sign a contractor’s agreement with us. It defines the relationship in a way that benefits all people involved. It details the work being done. It spells out what insurance they need. It tells the contractor when they will be paid and how much. It also details what happens should they not perform as expected. This is the area that will make or break your flip. The contractor’s agreement is some help in weeding out any bad contractors, but it is not the end. You will need to remain diligent in checking their work early and often.
A detailed scope of work lists every task you are needing to get done at the house to make it ready for sale. It lists the paint colors and sheens. It lists the type of doors and trim and knobs. Are windows being replaced? Where are they coming from? Who is ordering? What type of tile is being used? Literally every detail. We like to print this off (once it is agreed on who is doing what) and leave it at the house so all who are working can refer to it in their work. Once something is done it gets checked off.
Unexpected rehab work is always expected when flipping! You have all seen the tv shows where the flipper gets a call from his contractor saying he found a major plumbing or electrical problem, or maybe it is a huge termite infestation that was unnoticed before purchase, might even be a hidden foundation issue because the basement was full to the brim with crap. The flipper gets mad and finds that this development either blows the budget or they have to adjust their plan for the house. Just plan for it. It will happen. On nearly every house there will be something that gets revealed when work gets started..
Have a plan. The scope will need to be modified. The contract adjusted. You will have to pay more or change what you do to make the house nice. Maybe you have to install laminate counters instead of granite. Maybe you change the flooring from wood to carpet. Whatever it is, have a plan! The things that will kill a deal are electric and foundation issues.
Coordinating the people working is important. The demolition needs done first. This includes the clean out of all the loose items the previous owner leaves behind. It also includes any attached parts that are getting replaced, (i.e., kitchen cabinets, vanities, toilets, light fixtures, trim, doors and anything else that is getting replaced.
After demo comes the plumbing and electric work. This is work that goes on behind walls so it will need to be done before painting and cabinets get installed as they will likely need holes in the walls and floors to make their job a success.
We will visit the house weekly to ensure work is progressing as expected. The scope gives us a chance to see what is checked off and from there we can confirm it is done to our liking. We communicate almost daily with all contractors to hear what they are doing and ask how we can help them.
Once we approach the finish line we will go through the house and make a final punch list. This is a list that details all the things that remain before the house is ready to sell. It will point out any finishing touches that need to happen, missed paint, overlooked fixes, etc. Once that list is done, the house is ready to go to a cleaner to make it shine. After that, we schedule a professional photographer to take amazing photos and then we list the house on the MLS for sale.
We have flipped houses for 8 years and find this way to work well for us. You can learn more about our successful business over on the John Buys Houses website. There are other ways that will work, no doubt. We have explored some ways that don’t work at all and hope that you can learn from us and not have those stress inducing experiences.