As competition increases, flipping a house for profit becomes more and more challenging. To mitigate loss, house flippers need to reduce their spending to avoid only breaking even or losing money on their investment. This can be done by being smart about spending money and knowing when it is best to save.
Luckily, by gaining a bit of knowledge, the art of flipping houses can be done in a manner that cuts costs, reduces budget risks, and doing more with the allocated budget than initially thought possible.
We have compiled a list of helpful information in the form of ‘flipping house tips’ we are happy to share to help our fellow investors and clients approach the project cost-effectively and yield maximum profit from the venture.
Get An Inspection, Pass On A Written Report
Many people who flip homes believe they need to obtain a full written report from the home inspector. However, while it might be beneficial in some extenuating scenarios, the written report is not actually needed. In fact, while an inspection should be done, you can simply receive a verbal report from the inspector. To document the inspection, simply capture the notes the inspector gives on video with your cell phone to refer back to them later. Not only will this be a greener approach, but inspectors will also charge less for not having to write the entire thing up.
Shop Around And Negotiate With Your Lender
You should always shop around when seeking out hard money lenders. While their rates are generally close across the board due to competition between them, what may seem like small rate differences, can make a significant difference. Depending on how much you are borrowing, as little as 1% rate difference can turn out to be a lot in terms of savings and ultimately the yielded profit.
Lenders utilize REI/kit flipping software to collect the data necessary to conduct analysis when determining loan rate discounts and underwrite your loan. There is no reason not to use this same means to your advantage. REI/kit will provide you an advantage as a borrower if you know what rate you should be getting. It's ok if you don’t have a lot of experience in this area too. Running the analysis on your own and presenting that as a negotiable argument to your lender grants them the reassurance that they are dealing with a savvy, intelligent person and worth investing in.
Negotiate Wholesale Fees
If you are looking to flip a home distributed by a wholesaler, keep in mind that they are looking to unload the property and look for a deal that makes the most sense. However, suppose you are the only interested party. In that case, you have a lot of leverage in negotiating power, as almost any deal is better than none at all from the wholesalers' perspective.
Even if you hold the leverage, be cautious not to overreach. You could negotiate a better fee for yourself, but don’t force the wholesaler into a deal that shortchanges them, or you will burn a bridge in getting more deals from them in the future.
Improvements Are Great, But Don’t Go Overboard
Before evaluating any improvements to the house, it is important to weigh their merits. Of course, as a project our name and reputation are tied to, we always want to present the best product we can. While improvements to the property are significant, how much you put into it should be carefully considered.
Just remember that, at the end of the day, the business of flipping a house is to make a profit off the venture, not to indulge in a passion project. Your goal, therefore, is to provide a product that people will want and need from it. This means studying the market demands to see what people want from a property and carefully weighing that against the additional costs of making that happen.
There is a point of diminishing returns that can be reached when you over-improve. The more you pour into the property, the more you have to sell it for. Eventually, you will not only price out many buyers, but you will also make a house that is worth far more than the neighborhood it resides in. Then you will have to sell it for lower costs to unload it, reducing or even eliminating your profit.
Smart Shopping For Appliances
While you want to give the house you are flipping the best look you can, you do not need to chop away at your profits by getting brand new appliances. Many retailers have appliances that have very minor imperfections or have been refurbished, with most of these not even being noticeable. You can try purchasing such appliances from ‘scratch and dent’ stores where they are repaired and restored to ‘like-new condition, but the prices, because they are not, in fact, brand new appliances, are significantly lower, making this an excellent area for saving when flipping a house for profit.
Cabinet Updating And Painting
If the cabinets in the home are in pretty good shape, they do not need to be replaced. Many savvy house flippers actually just repaint the cabinets with hard cabinet paint, and many cabinets look like they are in pristine condition.
Some go as far as replacing the cabinet doors, but a full investment in cabinet replacement can be very costly, especially when it is unnecessary. Purchasing cabinet doors come as about 30% to 35% of the cabinet replacement cost, and hinges can be acquired through online retailers to attach the doors on. Do so carefully, and no one will be able to tell the difference.
Utilize Craigslist
Platforms like Craigslist are beneficial for those flipping homes. Not only can you acquire appliances, bathroom cabinets, building and cleaning supplies, and other needs for the flipping project at lower prices, you can use it to offload things from the home that will not stay post-renovation. The money generated from these sales can be put back into improving the property without you having to dish out those additional funds.
Use Remnants For Vanities And Countertops
Instead of buying brand new stone slabs for countertops, it is always a good idea to check local stone yards for remnants of already cut stone. If the stone has been cut for other countertops, there is typically very little demand for what remains. If you can make use of it for your needs, you can get those remnants for as long as 10% of the price of the full stone. This will result in significant savings instead of the often massive investment in pre-cut stone slabs.
Save On Flooring Materials
Flooring materials, like appliances, can be very costly. Still, in the grand scheme, there are many ways to save money in this regard too. You can visit liquidator outlets or vendors who sell material in bulk to get great discounts on prices. Many of the bathroom and kitchen flooring offered at these locations have been discontinued from production from their manufacturers, so the outlets are eager to offload these materials, resulting in significant discounts on those materials.
Conclusion
Whether it's what you buy, how you plan, or where and how you spend, there are loads of ways to save money on materials you need when flipping a house. Perhaps each one of their own will not yield massive savings, but summed together, the savings add up significantly as they span the entire house-flipping process. Now consider the savings you would receive if you flipped multiple homes. You start to get a good picture of how much extra profit these simple house flipping tips can yield you at the end.
If you have a renovation project coming up and would like a free estimate, give us a call at 281-901-0707.
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