4 September The Keys to Assembling a Great House Flipping Team September 4, 2023 By sma DIY, Home Inspection, Home Maintenance home seller, real estate 0 THE KEYS TO ASSEMBLING A GREAT HOUSE FLIPPING TEAM September 4, 2023 | Home Maintenance, DIY, Home Inspection | real estate, home-seller Some of the best must-see reality television today comes from house-flipping shows: seasoned real estate experts find appealing residential properties or fixer-uppers, then transform them into dream homes for a tidy profit. It’s no mystery why these shows are so popular either, as real estate window-shoppers, amateur handymen, and people with an entrepreneurial spirit are all drawn to the home renovation genre. With that said, the average Joe who might be interested in jumping into the house-flipping world should take pause due to the considerable learning curve involved. Anyone who hosts a show on HGTV is going to have vast experience and a top-notch team behind them that can make house flipping look far easier than it really is. To break into the house-flipping world successfully, a person would either need broad experience in real estate and home improvement or (much more realistically) a great team to lean on. If you’re looking into house flipping for supplemental income or a career shift, here’s some of the essential traits you’ll need on your team. What is House Flipping? Before jumping into the deep end, let’s review a few important definitions. Namely, what is house flipping anyway? “House flipping” is a term best understood as the act of purchasing a house with the intent purpose of improving and reselling in a short amount of time for profit. This can be done with old or neglected homes that need major TLC, or it can be done with properties that could simply benefit from updating or trend-chasing. While many home improvement shows depict full-time home flippers making consistent investments that lead to impressive profits on resale, real-world flippers recognize the risk-reward nature of these projects. Too many naive, would-be real estate investors might attempt to flip a home, only to discover that they lack the know-how, the capital, and the insight to make the right choices. The good news is that this isn’t the case for everyone, and it doesn’t need to be! Success in this field starts with patience and the right background experience. Who Do You Need On Your Team? 1. The Practical One The financial specialist probably isn’t the flashiest or most exciting position on a home renovation crew, but they are the most important. While theory-crafting how to quickly upgrade a home can be exciting, someone has to be able to determine how much the project will cost and whether the anticipated profits warrant the investment. The core principle of house flipping starts with the 70% rule, which dictates that a buyer shouldn’t pay more than 70% of a home’s ARV (or after-repair value). In other words, someone needs to crunch the numbers of how much an expected renovation will cost, how much a home should re-sell for, and factor in things like mortgage payments, property taxes, and other recurring costs until the house can be placed back on the market. On top of all of this, funding can be a concern for those who don’t have a lot of liquid funds. According to real estate data experts at ATTOM, nearly two-thirds of all home purchases with the intent to flip were cash-only offers due in part to how reluctant many banks are to provide loans for risky investments like house flipping. Teams that have a good financial expert in the fold can advise on realistic investments based on budget and will know to wait for the right home opportunity, rather than jump at the first interesting listing that could be more trouble than it’s worth. Whether this is a former accountant, or just someone who is great with numbers, an organized bookkeeper is a must for every house-flipping crew. 2. The Real Estate Market Expert Next up is the person that is up to date on what sells, where the sought-after homes are located, and what the local market is projected to do during the timeframe of renovations. Ideally, this person would have extensive experience working in the market, coordinating purchases and sales as a real estate agent. Agents tend to have insider knowledge within the area they work, and will more likely have an accurate pulse on a local market to help make determinations on which homes are a smart purchase and which might be a bigger job than anticipated. Additionally, once a project is completed, the task of marketing and selling a renovated home can be extremely difficult without the help of a skilled real estate agent. Since time is always a factor with house flipping, having a reliable agent contact is vital when it comes to closing quickly and securing the best return on investment. 3. The Home Renovation Extraordinaire A large portion of house flipping involves the actual renovation portion of the project. Because of this, many flippers have a background in things like contracting, plumbing, electrical work, or carpentry. “Sweat equity” refers to putting actual labor into a project, beyond logistical coordination and negotiation. Without this form of investment done right, a home flip is dead in the water. When hiring for contractors and other skilled laborers, it’s important to find people who can be trusted to do a good job and give informed, reliable advice. In addition, if the renovation work can be accomplished without hiring out, a considerable amount of the overall budget can be recovered immediately. This doesn’t mean that amateur handymen should attempt to renovate a house on their own, however. Jumping into a home flipping project with limited experience is a sure way to make costs rapidly inflate until it may be time to cut your losses altogether. 4. The Details and Crisis Manager Speaking of cutting losses. An investor never wants to find a great flipping opportunity, investing time, energy, and funds, only to discover that a major issue means that repairs will be much more expensive than previously calculated. Otherwise exciting projects can be considerably derailed by discovering things like mold, wood-destroying organisms (such as termites or carpenter ants), or a high concentration of radon. The beautiful thing about these home-flipping shows is that viewers get to watch houses get transformed and reach their full potential. This is why discovering a major issue can be so crushing beyond just the financial loss, and the truth is that these experiences could have been avoided with the right experience or assistance. People with a keen eye, and in-depth experience on some of the more costly home defects are important for home flipping because their input is the difference between catching larger repairs and being surprised with them later on. Home flipping is said to be a risky business, but partnering with residential home inspectors, commercial property inspectors, or other people that have a reliable track record of being thorough and detailed will help reduce the uncertainty inherent in these projects. NPI’s nation-wide network of professional home inspectors receive world-class training and is backed by decades of experience. To schedule your next home inspection, call NPI before you buy. Comments are closed.