I’m Tim Durkovic, president of the Durkovic Group with Douglas Elliman Real Estate. Welcome to this installment of “Real Estate Tips for Investors”.
The focus of this video is – what are some things to keep in mind when flipping a house?
As one of the top agents in the area, having sold in the 100s of Millions in property –
- I often come across people that want to make some money flipping houses. They have seen the shows on TV that make it look easy and figure it’s a quick way to make a good amount of cash.
- Well, it’s not as easy as it looks on TV, but it can be a great way to make a good amount of cash!! It actually was how I initially got into the real estate world.
- Here are some things I looked for trying to find a good house to flip:
- I always looked in areas that I knew were areas that were selling, that buyers wanted to live in.
- Once I identified these areas, I would analyze what the properties that were totally redone were selling for.
- Then I would start to look for properties that were on the market, but a price that was considerably lower than what the market value of remodeled homes was. One trick I used was to try and find homes that had been sitting on the market for a long time, that were ugly, but in great areas, and that had as much square footage as possible. This would make my potential profit increase exponentially – if I buy at 400 a square foot, spend 100 a square foot to remodel, and sell at 850 a square foot – the more square footage I have, the more profit I am going to make!
- You have to make sure, though, that similar properties — and that means comparable size, land size, bed and bath count and amenities — sell for the price point you are targeting to exit with in the area!
- Once you have identified a property, there are some key things to keep in mind in putting your budget together:
- The budget isn’t just the cost of the remodel – don’t forget to account for how much the money is costing for you to buy if you are leveraging. Don’t forget property taxes, insurance, and utilities. These are all part of what we call “carrying costs” that are often overlooked with figuring out your budget and therefore your profit!
- Make sure you have realistic timeline for the work – different cities can take longer than other in the permitting process, so make sure you do your homework on the city you are looking to buy in!
- Make sure you have a contractor that bids the job realistically, and ALWAYS allot a line item for a contingency or overage, like 10 or 15% because things ALWAYS come up!!
- Remember also, that depending on the market you are targeting at the exit of your flip, you need to pick fixtures and finishes that match up with your exit price point – for example, if you are going to try and sell for 3M, you cannot but low end appliances in the kitchen! If you want a premium for you flip, you have to be a premium product! Spending a little more on good landscaping, technology, etc. can very often NET you more on the sale!
- Another thing people often forget to account for in the flipping budget is what it costs to sell the property – This line item includes commissions for your broker, transfer taxes, escrow and title fees.
- Then when it comes time to sell – my biggest piece of advice is to make sure you are completely done before going to market! You never get a second chance to make a first impression- so check out my other videos in our Resource Tips for Sellers section to make sure you aren’t forgetting anything!
If you have any questions on this topic or anything else real estate related, or if want any additional information please don’t hesitate to call, text or email me at 310.738.8098 or firstname.lastname@example.org.