7 Things We Wish We Knew Before We Started Flipping Houses

building_blocks_house_blog.jpg

By Aaron and Christina Moore

Flipping houses has become life changing for our family. It’s become a passion, and over time, has proven to deliver far more financially than we could have imagined. So how can others enjoy finding their purpose and leverage flipping houses to grasp the lifestyle they really want, or, even more simply, just get much better returns on their savings and investment dollars?

Life is amazing today. We are able to enjoy so much more time with family than before we began investing in real estate. Our finances are set. We just love life, being able to help others enjoy the many rewards of investing in property, as well as empowering more individuals and families to get into great homes every day.

Of course it wasn’t always this smooth. There is a steep learning curve when it comes to fixing and flipping houses. There are so many working parts that it often frightens off those who could really benefit from it the most. So what have we learned on this journey? What do we wish we had known upfront? What might help the next generation of investors seize the opportunities faster and have success sooner?

1. There Are Good Contractors Out There

When we first contemplated house flipping we kept getting stuck on the fear of renovations. We saw others making money with this strategy. We had even done some basic renovations on our own home and had owned a couple of rentals which required occasional maintenance and sprucing up.

Still, taking the leap to more substantial renovations was a little nerve-wracking, even more so due to the fact that, like most people, we had some negative experiences with handymen and tradespeople in the past. We’re used to working with paperwork and technical computer stuff, not hammers, electrical wiring, and plumbing. Christina has her Masters in Chemical Engineering but always worked in sales, and Aaron has a Computer Engineering degree.

Thankfully we have found great contractors, and really owe a lot to their help. If we had tackled finding a qualified contractor sooner, we certainly would have been able to enjoy more of what we really wanted a lot earlier.

The two tactics that worked best for us were asking for referrals and using Kijiji. We’d recommend you advertise on Kijiji to find out who is available NOW. Interview contractors, start them off on something small, and then give them more to do once they have proven themselves. Referrals have also been invaluable. Get out and talk to other property owners, especially investors. Ask them which local contractors are really doing a great job, and which to stay clear of. With reliable contractors on your team, you can get out there and make offers on properties with confidence.

2. Be Crystal Clear in Communications with Contractors

Clear communication really applies to every part of the real estate industry. Never assume that someone else understands what you are looking for. If you don’t take the few minutes to be clear in your instructions, don’t expect to get exactly what you are envisioning.

Even your best tradespeople are not mind readers. We’ve found that many of them really aren’t a big fan of paperwork either. It’s just not their thing. That’s okay. Let them do what they are great at, but make sure the paperwork is there, and the specs are precise. “If in doubt, write it out”.

This really all comes together in the ‘Scope of Work’ document. Make sure you read all of your contractors’ paperwork and fine print carefully. Never mind what they say; if it isn’t in print, it doesn’t count. Drawings for any floor plan changes and new kitchen layouts are essential too. If a picture is easier to understand than writing, then use a picture.

Three areas where we’ve really found extra clarity is needed are:

  • Quality standards
  • What NOT to demolish
  • Pre- and post-demolition quotes

Way too many times we’ve heard contractors say, “It’s just a rental” or “You won’t be living here” to justify why the paint job is poor or why tiles aren’t level. At the beginning, we had contractors tear out kitchen cabinets that we had wanted to keep. We even had a nice washer and dryer ‘thrown out’. To avoid renegotiations or changes in billing later, we’ve also found it helps to do the demolition first, then re-assess the scope of work and probably get fresh quotes, too.

3. Sometimes Renovating is Unnecessary

In a hot market there are opportunities to change a house from unlivable to livable and make a handsome profit along the way. Flipping may require removing a smell, filling a couple bins with garbage, managing an overall cleanup, and/or repairing a few of the worst problems. In short, you don’t always have to do a complete renovation to make a property livable.

Not every house you renovate needs to be an artistic masterpiece, so pick your battles. There are lots of people who will overpay and buy a livable house just so they can renovate it to suit their own tastes. Think about the type of renovations banks will do when they get a power of sale. They get a cleanup crew in, fix the most urgent issues, and sell it.

4. You Make Your Money When You Buy

We learned this one from Warren Buffett. Appreciation is a great benefit of investing in real estate, as is generating higher prices from intense bidding wars. But it is really, really critical to check your emotions, and look hard at the math. Do the numbers work right now? Ask yourself, “Can I make a profit on this property no matter what?”

5. You Don’t Always Have to Flip Them

There are various ways to work the numbers and to determine if you are making money when you buy. And the multiple exit strategies real estate offer are really a huge advantage. Are you buying low enough that you could sell it fast and make money? Or could you rent this place out and put some extra cash in your pocket until a better time to sell comes along? Looking back, we wish we had held on to more properties. Yet, investors will find they go through different phases, with different priorities. Some years you want to build up your working capital to be able to flip multiple properties simultaneously or to do bigger deals. Other times you want to buy and hold, or even enjoy periods of the more passive income, so you can just focus on living life or being with those you love. For us, a rule of thumb is if we put 20% down on a property and it produces positive cash flow, it’s a keeper. If not, we’ll flip it.

6. Find Your Competitive Advantage

When the market is hot, or there is a really great real estate reality TV show, thousands of individuals are inspired to get started investing in real estate. That drives up the competition for properties and prices. Sometimes it gets to the point where newer investors can’t see how to make money, or they begin gambling with really big figures.

We’ve found that you can actually do very well in these times, even with offering more money for a property than others. We can still make more money in the end than the competition by finding our edge and competitive advantage.

Three ideas to improve your competitive advantage include:

  1. Becoming or marrying a Realtor® and then saving the massive fees on buying and selling
  2. Flexing your own handyman or project management skills, and saving on contractor costs
  3. Gaining access to less expensive money to finance your investments and renovations

What talents and resources do you have that you can use to your advantage?

7. Success is Hard Work, Not Luck

This is true for musicians like David Bowie, airline CEOs like Richard Branson, or real estate moguls like Donald Trump.

‘Overnight’ success is usually many years and mistakes in the making. This myth makes the majority lazy, always looking for an easier short cut. Successful real estate investors don’t just trip over great deals or get lucky with easy rehab projects. Instead, they work to put themselves in the right place at the right time, with the right team members and proven systems. They are willing to go out and try what others won’t.

Conclusion

Aspiring house flippers can suffer from the fear of getting started, the doubt of finding good help, as well as rushing to find the ‘lucky’ deals. Winning at flipping houses can take a little effort and real work. Yet, with a solid strategy and creative thinking, taking the extra moments to write out the details, and building connections and relationships with others in the industry who are doing well, success can come faster than you imagine.

We will enjoy our real estate lifestyle for years to come. Flipping houses is one of our favourite real estate strategies. It gives us the capital to keep buying long term holds and provides a great lifestyle to top it off.

Aaron and Christina Moore have been growing their real estate business full time for the past eight years. In this time they have bought over 30 properties valued at over $10 million. As a Realtor®, Christina has helped clients buy many cash flowing properties and flips.

They are Gold REIN Members and grateful recipients of multiple REIN awards. They buy, hold, and sell real estate in the Greater Toronto Area.

{{cta(‘a2f69965-cbaf-4089-8592-d93ceeef8740′,’justifycenter’)}}

Leave a Reply

Your email address will not be published. Required fields are marked *