Flipping a house on TV is full of beautiful people that always look good and work that always seems to go right. Then the camera cuts to a new scene where all the work is done and the house sells for a great profit.
In the real world I found out that a house flip is a project, with risks, that need to be managed. If you want to learn how to flip houses you need to be ready for this because some problems are unavoidable, but dealing with them is not.
When flipping a house you have to keep track of two things while the project is ongoing: budget and schedule. Because I hired a general contractor to do the work the cost was fixed. The only additional costs were going to be for unforeseen circumstances that forced us to deviate from the scope of work and/or any changes we mutually agreed upon. So that leaved me then to ensure that the project stayed on schedule.
House Flipping Tips: Always give your contractors a deadline to complete the work and establish both rewards and penalties for meeting or exceeding the schedule.
I gave the GC four weeks to complete his portion of the work. During that time I had to also coordinate other work including paint, landscaping, purchasing appliances and pest control.
The first problem came when the water was turned on to the house and we soon found out not all the water lines were turned off.
House Flipping Tips: Coordinate with utility companies to be at the property when they turn on the utilities.
I know it sounds fundamental but it was one of those things where I thought somebody was going to be there and they thought I was going to be there. I freaked out when I first saw the water coming down. Fortunately it was just a small drip from a bathroom line the GC crew had left open and another one from the water heater that had also been left open.
Fixing this required tearing down some drywall, drying out the portions that got wet and replacing the drywall. As far as the water heater, initially we thought it was busted and needed to be replaced ($500-$600) but it turned out all it needed was a cap to cover the drain spigot on it ($.89) - good news!
The biggest work portion of this house flip was the kitchen work, the bathroom shower installation and the flooring. All those proceeded flawlessly and I was very pleased how the work progressed. We were right on schedule, all the work had been completed and the house was getting transformed into something really nice…then it happened…
Facing My Fears When Flipping A House
When I first considered flipping a house I said that I would take on almost anything except two things: structural stuff and mold. Lo and behold what do you think happened?...
I got them both!!
First, the basement wall that we had decided to frame and finish in order to have a fully finished basement started leaking. And it did so after it was finished.
Here you had this wall that had not shown a single sign of moisture during some of the torrential spring rains and now that it had been framed, dry walled and painted it started leaking…you gotta be kidding me!!
On top of that one of the basement rooms that had been fully finished by now with new carpet, paint and trim was now showing signs of mold in a corner…double whammy!
As you can imagine, this being my first time flipping houses, I flipped out!
What am I going to do?...How much is this going to cost me?...Can this be fixed?...Nobody will ever want to buy this house…
I recognized the uselessness of all this negative thinking and proceeded to focus on the solution to the problem instead of the problem. After a dozen phone calls to contractors and other investors and several days researching mold and mold abatement I realized that both problems were very correctable.
House Flipping Tips: In real estate (just like in life) fear is a result of ignorance. That is why the majority of people will never invest in a great real estate opportunity. When you educate yourself you can change that.
House Flipping Tips: When flipping houses there is almost no problem that cannot be solved for a price $$
Long story short…there are companies that specialize in waterproofing leaky basements and mold abatement. Much to my surprise both are very common problems especially in this part of the US (south east US). So I proceeded to once again get three quotes for each service.
I explained to each contractor that I was flipping a house and how I needed to get the work done as quickly as possible so that I can put his house on the market. I found one company for each service that was willing to work with me at a fair price.
I promptly hired them and all the work was done – both mold and basement waterproofing – within four days. I then coordinated with my GC to do some patch up work to repair some drywall that had to be removed and repaint the affected sections.
Work done – crisis averted.
Flipping a house lessons:
Problems are usually not as bad as they appear. Educate yourself, ask among your network and focus on the solution not the problem.
The reason you have to make sure you buy low is so that you leave yourself a safety margin for unforeseen circumstances.
Be fair to your contractors. The contractors that I ended up hiring for the mold and water proofing work were those that were willing to revise their quotes after I explained my situation. They did great work and I have referred them to other investors that have ended up also hiring them.
Now that all the work was really completed it was finally time to put it on the market. How do you market, advertise and sell a house in the worst real estate market in a decade? Did I make any money on this deal?? What did the house looked like when I was done?