Diving into the world of house flipping can be lucrative — most sources say you can expect to net 10 to 20% of the sale price. However, if you’re not careful, you’ll fall well short of your target — and maybe even lose a lot of money.
Maximizing your returns requires careful planning and decision-making. It’s important to both cut costs and focus on maximizing the value of the home. How? Here are some tips to use on your next flip.
Cost-Effective Flipping
The first step is to find ways to keep costs low without compromising the safety or comfort of the future buyer.
As part of this, it’s essential to estimate costs correctly. If you overestimate, you could get a large loan and pay unnecessary interest, or you might over-renovate for the area and drive buyers away. Underestimating cuts into your profits.
You can estimate materials costs by going to a variety of home improvement stores and writing down the range of prices for materials from flooring to paint to cabinets. Put this in a spreadsheet and update it regularly, taking the average of the highest price and lowest price of an item for your estimate. Websites like Angi and Remodeling Cost Calculator also offer online estimation tools.
For labor costs, talk to other flippers and real estate professionals to find out the best contractors in your area. Get to know the contractors and what they charge, and work with reliable, affordable pros.
Here are other tips for cost-effective projects.
Balance DIY and the Pros
Novice flippers often overestimate their abilities and try to DIY everything. Not only does this lead to slower project completion and sloppy work, but it also causes cost overruns when the flipper needs to hire a professional after all.
Be honest with yourself and budget appropriately for professional work where you need it while making clear plans for any DIY work you plan to tackle. Remember to put safety first — both yours and the future homeowner’s!
Negotiate with Contractors
An important part of business that’s easy to overlook is negotiation. You can negotiate the price in general, and you can look at arrangements such as supplying some of the materials in return for a reduced project price, allowing you to avoid markups.
Another way to get a great price with contractors is to do flips during the offseason when the pros are looking for work and are more likely to be flexible on price. Be sure to get multiple quotes and choose based on both quality and price, not price alone.
Don’t Over-Renovate
Finally, you want to avoid making the project too expensive for the area. Having a home with impressive finishes and expensive flooring looks great on TV, but it won’t help you maximize your profit.
Instead, focus on creating a renovation comparable to existing homes in the area. Having clear comps sets an easy-to-understand price and helps the home sell more quickly.
Increase the Home’s Value
The other side to a profitable home flip is ensuring that the work you do will help grow the home’s value. Buyers see homes as both a place to live and a long-term investment, and making the home attractive in both ways will give you the best sale price.
Weatherproofing and Energy Efficiency
Weatherproofing will depend on where the home is located: you might think about hurricanes in Florida and earthquakes in California. No matter where you are in the country, though, energy efficiency is one of the top home improvements that add value to a home.
You can weatherproof and increase energy efficiency with excellent insulation, a smart-home setup that makes temperature, water, and lighting adjustments easy, and more.
Outdoor Spaces
Beautiful outdoor spaces also add significant value to a property. People love having a space to entertain and enjoy nice weather.
Some outdoor projects that add value to consider include outdoor lighting that keeps the yard safer for residents while deterring intruders, beautiful landscaping, or a beautiful deck or patio. Avoid adding a pool unless they are standard in the area — pools can be expensive to insure and maintain, which can drive away home buyers.
Alternative Energy Sources
Another way to make a flipped home unique and attractive to homebuyers is to include solar panels. Solar panels can save homeowners a significant amount of money, and it helps them improve their environmental impact.
Homebuyers are also willing to pay more for a home with solar panels, making this a win-win project.
Enjoy a Profitable Home Flip
With careful planning, you can reduce your home flipping costs while also focusing on projects that maximize value. That will help you hit your profitability targets (and maybe even exceed them).
We wish you the best of luck in your home-flipping adventures!
