How to Flip a House 101 – Part 2
In last week’s post, we went over the first part of flipping houses — the Seller and the Lender. If you missed it, then be sure to check it out. Today, we’re going to talk about the other two important items standing in the way of your big fat paycheck: the Contractor and the Buyer.
1) THE CONTRACTOR
Having the right general contractor (or handyman for smaller jobs) can make or break your entire deal. The money you’re going to put into the rehab is almost assuredly going to be your biggest expense over the course of your real estate deal. Your contractor needs to be your partner in the transaction. I don’t necessarily mean an equity partner, but a partner in that you both share the same interest — seeing the right work get done well and getting paid at the other end.
You should first walk the property yourself before talking to your contractor. Get an idea of what kind of rehab the property calls for. Don’t try to win any magazine contests in a lower class neighborhood — you won’t get that money back when it sells. Instead, try to be the best house on the block by just by a little bit.
When you have an idea of the scope of work, then actually draw up a detailed scope of work! Then you can call up a few GC’s and have them walk the property with the scope in hand and collect and compare their bids. It’s also a good idea, of course, to check referrals of past work and actually drive out to the properties they’ve recently worked on. If they’re proud of their work, they should have no problem making the proper arrangements. The cheapest bid isn’t always the best — do your homework and see how provides the best value given your budget.
If you’re not sure about what type of rehab would fit the area, then don’t be afraid to engage your contractor in the discussion. He’s your partner and should work hard for you to be your go-to guy for future jobs, right? Make him earn it with his honest, professional opinions.
2) THE BUYER
Perhaps the most important player in the deal, the Buyer will determine how much money you make at the end of the day. However, there’s much you can do to make sure it’s a number you can not only live with but one you can celebrate! Here are a few tips to get that super payday:
- Start marketing the property NOW. Don’t wait until the rehab is done to let everyone know about your beautiful house for sale. Start from day one. Maintain a YouTube channel of video updates. Share it on Facebook and Twitter. Let the neighbors know – they may have family members who’d want to move in.
- Add “Sizzle Features”. Sizzle Features are those flashy items that make your house stand out from the cookie cutter homes up and down the street. Add a wine fridge and high-end digital stove to the kitchen. Paint the roof white to help keep out the summer heat. Install environmentally friendly materials for a more kid-friendly and healthier home and higher appraised value.
- Reach Out to Foreign Buyers. Depending on your market, foreign buyers may be scooping up hot properties in your area. Use sites like LinkedIn to pitch your properties to buyers in China, Japan, Canada and other countries that view the American real estate market as ‘cheap’.
- Go Another Round. Once you have some potential contracts in hand, don’t be afraid to ask the legit buyers for their highest and best offer. Let them know there’s competition.
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Tags: Flipping Houses