Months of hard work and budget crisis are normal when it comes to flipping a property for profit. You always end up over where you had intended to spend, and most of the time the property will feel like it took twice as long as expected to complete.
All those little “hidden surprises” tend to pile up.
On top of the issues with time and budget come the often overlook portion of any flip, HOLDING COST.
And what comes with HOLDING cost? The actual SALE of your property.
You’ve crossed your T’s and dotted all the I’s, even survive that aneurysm over the 30k over budget fiasco, but now you’re stuck sitting on a piece of real estate that doesn’t seem to sell.
Every month that property sits it costs you money. Precious. Money.
Everyone thinks their property will sell quickly. In a perfect world, it would. We have had properties listed one day and received a solid offer the next. The house was gone before the next holding payment. It DOES happen, but it’s unrealistic to believe that every single property will be a quick turn around time.
If you’re going into your first flip then make damn sure you’re ready not just for the grueling labor and headaches, but also for the WAITING. A property could sit for a long, long time before any offers are given and often even with an offer received, it can be a back and forth between you and the buyer.
So here are 5 tips on surviving the final stage of flipping.
1.) FACTOR IN AT LEAST 3 ADDITIONAL MONTHS OF HOLDING COSTS ON TOP OF YOUR BUDGET
If you think the house will take 4 months from start to finish, add an additional 3 months worth of holding payment onto that. Why? Simple…
Those 3 months will give you time to list, showcase (such as open houses) and then go through the process of exchanging to complete the purchase. Brokers/Real Estate agents don’t always work fast and transferring things such as deeds and negotiating inspection expectations can be tedious. Very rarely are things straight forward and simple. Make sure you factor this time frame in so you don’t find yourself scrambling for cash to keep the property before the deal is sealed.
2.) REACH OUT TO PROSPECTIVE BUYERS
Make sure your agent keeps close tabs on those ‘sign-in’ lists. If no one bites on the first or second open house, it will be worth your wild to reach out to the folks who came to check the property.
Don’t be afraid to ask them why they aren’t interested in the property. Is the price too high? Was there something about the property itself that they wish was different? Their feedback will help create a game plan to get the property sold FAST.
We did this with one property where we reached out to people who came to our open house and after speaking with some prospective buyers, found our price and location didn’t mix well. Lowering the price a bit got us a quick sell afterwards.
3.) MAKE REALISTIC EXPECTATIONS ON YOUR SALE
Most houses don’t sell within the first 24 hours. Or week. Sometimes not even in the first month of being listed. Check out Redfin and other real estate websites. What is the average turn around for the properties that are comparable to yours? If houses aren’ selling quickly in that area, then don’t expect yours to be the exception.
Having a realistic idea of how quickly your property will sell will save you money and headaches in the long run.
4.) CAN THE PROPERTY BE RENTED VS SOLD
If your property hasn’t sold, and is just sitting there milking the bank account; do you have the option of RENTING it out in the short term?
Renting is very different than flipping, but you would be surprised how many people actually actively look for a short term houses to rent out. Lots of jobs, especially tech jobs nowadays, require employees to move about often and not all of these people want apartment living. Renting out a house is a great alternative to cover that holding cost until the market in that area picks up. Look into the laws and regulations of your state and have your agent compare rentals in the area to see if this is a viable option for you.
5.) ACCEPT THAT YOU MAY LOSE MONEY
This is the scariest part of any business endeavor, and regardless of WHAT you do as a side gig, it can happen to anyone. Anywhere. Doing anything.
With flipping comes the risk of losing money. Don’t get yourself involved in this business if you can’t accept that and most importantly, can’t PLAN for the PLAN B if it happens. I personally know people who got into this game and went 400K in debt from bad business decisions and disillusioned expectations.
Make sure you invest wisely into the property, budget as closely as possible, and slap that bad boy on the market for a FAIR price. Just because you sank 100K into the property doesn’t mean it’ll suddenly sell far over what other places in the area are selling for.
So there you have it folks.
Five basic tips on surviving the last leg of a flip. Do you have any experience with flipping? Any tips you’d like to add to get over that last hurtle of the sale?