Buying a home to flip can be a tricky business. You know that you ideally need to buy an undervalued or distressed home, but in the same breath you’ll be taking on all the problems that can come with it.
Most investors set up an informal or formal house flipping business plan to help them make the best investment. The fix and flip checklist is something we suggest you add to your plan if you want to avoid getting caught out by hidden issues.
This is the fix and flip checklist you need to read before you buy:
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It’s best to start with the biggest part of the home which is the overall structure.
What you’ll want to check here will include a few different things. You need to go further than the easily-visible and accessible areas and really dig deeper into things like crawl spaces and attics. Try to list the areas you think are most difficult to reach and check those the most thoroughly – if it’s hard for you to get to, the chances are good that the previous homeowner would not have done much maintenance there.
Some of the potential problems you might find in the home structure will include:
Water damage is a common issue found in homes. The reason water damage is so dangerous is that it can lead to mold which is highly hazardous for the inhabitants. The easiest way to identify water damage is to look at the outside of the home structure.
Is the house at the bottom of a slope? Are there downspouts that are diverting the water away from the home, and in what state are the gutters?
The roof can also hold additional clues. Missing roof tiles and shingles can indicate water entering the home during bad weather. The other way to check is to look at the windows and window frames. If there are any separation or soft spots, you can bet that it will make the property more humid which is the ideal environment for mold to grow.
Sometimes, older or distressed homes can come with issues like ants or termite damage. These are very serious problems that can affect the structure of the property.
There are a few different ways to spot damage from potential termite or ant infestations. The first outward signs that there may be some unwelcome insect residents are things like uneven or swollen flooring, visible changes to the ceiling, and a scent similar to mildew. In many cases, a termite infestation can actually come across as water damage.
Another sign can be found around the foundation of the property. Some termites create access tunnels to above-ground food sources, usually located close to the home’s foundation.
Structural issues are the one thing you want to identify early. Things like leaning walls, sticking doors, cracks in the walls, and the drainage will all need to be addressed before other major renovations can take place. There’s no point in painting the walls if they will end up cracking and flaking just a short while later.
The best way to get on top of structural issues is by working closely with a contractor and property appraiser. Doing a walkthrough with professionals will help you learn what they look for so that you can take over that responsibility yourself in the future.
Poor insulation can be especially bad for your investment property. If the property is located in a colder region, bad insulation will cause the home to leak heat. This leads to a spike in utility bills and can be a full-on hazard that requires professional repair.
You can tell that there are problems with insulation if there are symptoms like freezing walls, exterior wall damage, internal moisture like condensation, and mold to name a few.
It is possible to replace insulation yourself, but if you haven’t done so before then it may be better to work with a professional that can help you find the best type of insulation for your local climate.
Older properties often come with the caveat of having hazardous materials tucked into the walls, or having out-of-date building approaches. While these homes can have a lot of character, these issues will need to be addressed for you to resell the home in good conscience.
Be on the lookout for lead pipes, asbestos insulation, popcorn ceilings, and other potentially dangerous materials. When in doubt, always have a professional come out to evaluate.
At the same time, take an in-depth look at the electrical system. Ultimately the goal is to get everything up to code.
The Home Interior
With the structure fully-evaluated, you can start to focus more of your attention on the interior of the home, and the less-intensive projects. This includes assessing what needs to be painted, repaired, or replaced – a dangerous game that can quickly lead you to go over your budget.
The interior options you want to pay careful attention to will include examples like:
Checking The Mechanicals
If you plan to sell the home with all the fixtures, you’ll need to ensure that the HVAC, water heater, and other plumbing fixtures are all in good working order and condition.
These systems are designed to create a more comfortable living environment, but if they’re in poor working order you can bet that they’ll be doing the opposite. Buyers will pay careful attention to these systems, and if any defects are discovered you can expect them to lower their offer accordingly.
Walls, Ceilings, And Floors
Next, you’ll want to take an objective look at the most visible parts of the home. The walls and floors will be some of the first things that buyers will see when they view the property.
Take stock of what needs to be patched, painted, or renewed in another way. The good news is that this part is easy to DIY if you want to save on the cost of labor. The same goes for the ceilings – give them a fresh coat of paint and choose a neutral tone that makes the room seem bigger than it is.
You’ll also want to keep an eye on the flooring. Wooden floors can be refinished and tiles can be resealed. This is a good way to make the floors feel like new without having to replace them completely.
Kitchens And Bathrooms
Whatever you do, don’t underestimate how important these spaces will be to buyers. The chances are good the majority of your budget will be spent on optimizing these rooms, and that’s exactly how it should be.
Ask yourself, how much renovation and renewal is needed for these rooms to feel like-new? You want the fixtures to be modern and brand new, cabinets to be either replaced or repainted and the appliances either fixed, deep-cleaned, or replaced completely.
The same goes for the bathroom. You want to ensure that all the tiles are in good condition, the fixtures look good, and that you have maximized the space. Try to add a storage option or two (a shelf is a great option in tighter spaces) and make sure that you add suitable lighting options around the mirror or vanity. These are the places you really want to add a few nice touches that will be attractive to buyers.
Tips For Inexperienced House Flippers
Everybody has to start somewhere, but you need to be aware that there are pitfalls that less-experienced investors fall prey to.
The only way to avoid these pitfalls, or minimize their impact, is to work with a professional. Whether it’s a property appraiser, senior house flipper, or another real estate service provider with expertise, you need someone on your side that can point out potential pitfalls to you.
The sad truth is that many new house flippers will try to take on these jobs themselves, without realizing that they’ve missed key issues that will be expensive to fix. By the time these problems have presented themselves during the renovation process, it will be too late. This makes it no surprise that many budding house-flippers are the one-and-done type. The pressure of overseeing everything yourself can be crippling – know when to get in an extra hand.
The other thing inexperienced house flippers need to bear in mind is that what they personally find attractive in a home may not be what the market wants. The most successful flippers have the following qualities:
- Due diligence – they do market research on comparable homes in the same neighborhood
- Timeline management – they have an estimated timeline of how long renovation will take and they ensure contractors keep to it
- Budget planning – they take the time to get estimates for pricing and keep to it as much as possible
You have to remember that the above actively contributes to not only one successful flip, but to multiple as the investor’s experience grows. Flipping houses can be a lucrative career if you can get past the initial hurdle of learning how to do so effectively.
The Keys To Success
There are a few different things you can do to give your flip the best chance of succeeding. The top one is to put together a team you can trust – you need a contractor with lots of proven experience, a property appraiser, sub-contractors, and more to make your project a profitable one.
Sure, you could decide to save on the cost and take on more of the projects yourself. The problem is you may not be as handy as you think you are or have the full time needed to do everything on the list. Working with a professional from the get-go allows you to save on the time and effort, and also helps you avoid paying extra for someone to fix your mistakes.
The other thing you’ll need is a solid fix and flip lender. New Silver is a technology-enabled non-bank direct lender primarily focused on providing real estate-backed financing for the United States ‘fix and flip” market with a concentration on single-family residential and small balance commercial assets. We have newly-lowered rates, online applications, and fast closing upon approval – funding for flips has never been this easy.