Flipping out!

With all of those 'home flipping' shows out there so many people are trying it out for themselves.  And it's a great and quick way to make so cash BUT you have to know what you are doing.

Just this week I met with a 'flipper' to help him with an interior and exterior colour package to make the house look amazing but on a tight budget.  The house was originally built in 1959 and was completely untouched.  He has some great ideas to make the house look incredible and really attract buyers - he's opened up the floor plan, he's adding new tile (to replace the old and dated linoleum), new light fixtures, new paint, updating the bathrooms and cleaning up the exterior which is currently covered up by 3 large and overgrown evergreens.

But already he has made some mistakes that have really eaten up his $30,000 budget.

1-  He met with a kitchen designer (which is smart) but you must as a flipper communicate your budget and what you are doing.  Yes, you want the home to look good but within a budget.  His kitchen will cost him $10,000 and that is just for the cabinets - no flooring, no counter top, no appliances, no back splash, no lighting - so now he really has to make the remaining $20,000 really stretch.

2 - His realtor has told him he can build an income property in the basement (aka a basement apartment) which is true but he needs to clear this with the city first to make sure it is a legal basement apartment. To have a legal income property there are certain permits are required along with inspections.  If you do not get these permits or inspections it can really cost you in the end. Lucky for this flipper he has not started the work on the basement and is now thinking about just finishing up the basement with some new lighting, drywall, paint and carpet for a rec room space.

If you are interested in house flipping, here are some really important tips to follow:

1.  Do not get emotional.  This is a business transaction.  Yes you need and must care about following building codes but when it comes to the renovation do not get carried away with the upgrades and expensive pretty things.  also do not get too emotional when it comes time to sell, by holding out for the right price you are losing money every month by paying a mortgage.  Listen to the market.

2.  First impressions really matter.  We are all familiar with the expression 'don't judge a book by it's cover" but when it comes to buying a house (and getting top dollar) the 'cover' matters so make the house look it's best inside and out.

3.  Don't get too personal with your flip.  Make sure to choosing interior and exterior finishings and colours that will attract a broad range of buyers.  So don't get too bold with your selections.  If you aren't certain what to choose ask an expert in a home improvement store, paint store or cabinet store - what is popular?

4.  Focus on the hot spots.  Kitchens and bathrooms sell homes - so spend the bulk of your time and energy in there.  Keep your budget in mind, what's popular/selling in the neighbourhood and the buyer expectations, for example f you are trying to sell a home in a high end neighbourhood buyers expect stone counters, hardwood flooring etc...

5.  Time is money.  Have a plan and stick to it.  Have a list of what you need/want done.  discuss this list with your contractor and/or crew and create a realistic timeline of everything that needs to be done.  Bumps in the road do occur (I've never heard of a Reno that hasn't hit a few snags) so factor in a few days grace.  Tackle the largest jobs first.

6.  Find good help, although hard to find.  Ask around.  Make sure your contractor is there everyday and communicate with him everyday - asking for updates on how the house is going along with your budget.  Check on the home everyday too - this always surprises me when investors do not actually check on the home to see the progress - this is a must!

7.  Paperwork is normal and get it done first.  The paperwork I'm talking about is permits.  You need them before the work starts and they can take  few months but do not start the work without them because you can be shut down if you do.  Keep all receipts for all of the items you purchase as well - you may need to make returns or exchanges. You will also want to track you expenses and use those numbers to help you estimate for your next flip.

8.  If you are thinking that this is not a one time thing - work your way up.  Start with a small project 'a lipstick' job meaning a job that is simply cosmetic.  Take one bigger projects once you have some experience under your belt.

9.  Expect the unexpected.  Be prepared for silly things to happen along the way.  Lost paperwork, not enough tiles were delivered, the paint colour is off, odd feedback from potential buyers...not much you can do to prepare or circumvent this from happening but expect it.

10.  If you are working with an agent (you probably did with the purchase and might for the sale, too) talk to them about what they think the home could sell for after the renovation, who they think will buy the home and what will that buyer be looking for.  The answers to those questions will really help guide you to make certain choices.  For example, the flipper I met with this week has not had those discussions with his realtor.  I suggested to him that the buyer might be a young family and an income property in the basement might not appeal to them, they would probably prefer a basement family room.