Get In On The "Fix and Flip" Market
How do you determine if it is the right time to get in on the "Fix and Flip" craze?
With all the house flipping show on HGTV, it is easy to get excited about the prospect of flipping a home to make a lot of money quickly. But how do you really know if now is a good time to get in the market to remodel and sell homes. Here are a few tips to follow if you have dreamed of being a house flipper like the ones on TV.
Steve McIltrot is the owner of A Humble Abode, a Denver home remodeling company. He got involved in the fix and flip market when he started working with a local realtor who calls on him to turn a non-selling foreclosure into a quick sale. According to McIltrot, fix and flips can be a gold mine. In fact, “Fix and flip now is what the stock market was in the ‘90s. He says "If you’re thinking about getting into this lucrative market, it’s a good idea to have a reliable remodeling company at your disposal. Although the typical fix and flip repairs/spruce-ups are minor, i.e., ones you can perform yourself, you could run into snags."
Dan Auito, author of “Complete Home Rehab in 10 Days,” says that in order to succeed in F&Fs, “You must be somewhat of an appraiser and deal finder. It takes time to recruit your cosmetologists, but you will run across them in your travels. Friends and family usually can provide you with some serious leads. Start networking and talking to tradesmen. Get their numbers and schedule them to descend upon your ugly duckling at certain times and watch the transformation begin.”
One way to avoid potential “money pits” according to Auito, is to be sure that three areas of the house are solid: electrical, plumbing and heating/cooling systems. “These systems are expensive to correct in relation to the value they return to you upon resale,” Auito says.
Other areas to pay close attention to: roofing, foundation and structural integrity. Unless you have a large corporation backing you with an open checkbook, you want to stay away from foreclosures that have problems in these areas, because your return on investment won’t be substantial enough to make it worth your while.
Try to find foreclosures with simple “cosmetic” problems. Find yourself a reliable remodeling company (like A Humble Abode) and use the following procedure to turn over your investment in short order, according to Dan Auito:
- Order a dumpster for about 10 days and get your demolition team to throw out everything.
- After the house is clear of debris, it is time to paint and patch. This is the biggest "bang for your buck". Make sure you use quality paint and the most updated neutral colors.
- After the painters leave, the flooring guys can lay tile and carpet, which will take two to three days.
- Next bring in the cabinet installers and handyman plumber.
- Last comes light fixtures, vanities, toilets, sinks, doors, switch plates and outlet covers.
“Ten days are up,” Auito says, “and this house is either held out for rent, lease-optioned or sold for a whole heck of a lot more than the ten grand that was put into it, if that much.”
Auito gives this example of a successful F&F: “I bought a house for $55,000. Its deficiencies were purely cosmetic. I used other people to do all the work and I pitched in to keep them organized. Ten days later, it was done. I spent a total of $5,000 on materials and labor and it appraised at $90,000 in 10 days!
That’s $30,000 in 10 days, not 3 months.”