It is that time of year where real estate is in the air. It’s that flipping season and this flipping girl is super excited about it!!!
Mmmmm… The smell of paint and freshly cut lumber. I know that some people think of spring and summer and the smell of carnivals and corn-dogs or beaches and beer come to mind. In the heart of the investor we go straight to the selling season. I am referring to real estate of course.
If you are a novice investor, or just starting to think about it, you may not even know that there is a season and it is upon us.
If you are thinking of trying your hand at this flipping game there are a few things you should know first.
1. Timing is key. We touched on this a little above. The real estate market in most areas follows the trends of the seasons. This is even true in “single season states” like California, Florida, and Texas. That tidbit of information was surprising to me. I had assumed that season equals weather. Nope.
The reason the sales prices rise and fall based on season are based on the typical lifestyle of an American. The best time to buy a house as an investor is between December and February. Why? Nobody else is. This is called a buyers’ market. There are more sellers than buyers. People are focused on the holidays between November and January. The first couple of months of the year we are all trying to get back into the swing of normal life, not to mention our bank accounts may need a little recovery time as well.
In the spring our mindset goes back into a more normal pace so that we are able to think of things like moving. This is when we transition into a sellers’ market. More people are looking for a phenomenal home than the homes available.
The peak time to list your home for sale is in June. Why? School. If you get a house under contract in June you should be able to have it closed and move in before school starts back up.
Investor Tip: If you plan to snag some great deals on a house to flip buy in late winter, Februaryish, and hold off on listing until at least the end of March or early April. This will maximize your profit.
2. Believe the comps. Do not over estimate the value. We all have a touch of narcissism when it comes to our projects. We believe that not only are we going to make the house the best house on the block but the best house on the planet. We are putting in the latest and greatest. Since our house will be better than all of the other houses on the market, obviously, people will want to pay a little more for it.
When you look at comparable sales you need to understand that, yes, there is sometimes an outlier that sold for way more than the rest but do not expect that to be the case for your home. Go with the average value. Do not over think it or get overly excited about one good sales price.
Over estimating the value is a number one cause profit loss. If you are bidding, renovating, and making decisions with a plan on selling a home for $225,000 when the rest of the neighborhood is selling for $204,000 you are probably going to walk away pretty upset in the end.
This was a mistake I made in the beginning. I would look at the price per square foot for the top sellers and calculate my bids based on that. The good news, more offers were accepted. The bad news, I had to skimp on renovations which ultimately cost profit in the end.
3. Do not rehab to your taste. When you are flipping a house you are actually building a masterpiece canvas for the buyer to personalize. This can be tough because of huge realm of the artistic possibilities available for a home renovation. I used to find it hard to not throw in an accent color throughout the house or something.
You should be familiar with the market trends and follow them. I know brass is making a comeback. Personally, I cannot stand the way brass looks. Guess what? I am pretty sure that I will be buying a cart full of brass lights, doorknobs, and outlet covers in the next year or so.
4. Do not neglect the small details. When you are flipping a home you are creating the PERFECT home for someone. Good enough should not be in your vocabulary. If you find that you are running out of budget before the details are attended, you under estimated your repairs and can plan on making a lot less than you anticipated.
Good enough = meritocracy. Meritocracy = a failed flip.
A few general tips…
Match the carpet to the (not drapes) paint. If you are using a carpet with a brown base (beige, tan, brown), your paint should have the same base color. Do not put in tan carpet and paint the walls gray.
Do not use basic white fixtures unless you are going for the stark white bathroom look that is trending right now. Otherwise it’s advisable to spend a few extra pennies and get a light package that host the latest in metal (or wood, that has come and gone a few times). Right now the brushed nickel is heading out but is still acceptable, oiled bronze is at its peak, and lightly oiled bronze is getting hot as summer heats up.
Be sure that your exterior is as loved as your interior. Paint, landscaping, and power washing should not be ignored.
I always tell my students, treat each house like it is a mansion.
5. Staging. Staging is giving your vacant house that lived in feeling. I am talking about that super tidy, everything matches, completely unrealistic house that we see in movies. I am talking about that house that would happen if the Cleavers (you know, June, Ward, Wallie, and The Beaver), moved to 2016 Mabury.
As a minimum you will want to furnish and decorate the living areas of the house. Meaning the common areas where your family will congregate; the kitchen, living room, family room, and such.
I recommend renting furniture rather than buying it so that you can tailor it to the house. Plus you do not have to store a second house of furniture when you are not using it.
So just to recap, start writing your offers in winter with the intention of selling spring and summer. Do not expect your house to have more value than any other home. Trust the comparable sales. Renovate the home in natural, popular colors and trends, not your favorites. Pay attention to the small details and flow of your house, your buyer sure will. Give the house a lived in feeling by adding furniture and decorations.
Happy Investing My Real Estate Junkies!!
I was born an entrepreneur. I am pretty certain that I was peddling passies in the hospital when the nurses left the room.All of the other kids in the neighborhood were riding bikes and playing with dolls I was selling jewelry out of a catalogue and creating a back yard consignment shop. At 21 I became a real estate investor and fell in love. This was/is/ and always will be my passion. I have been madly in love with flipping, holding, and writing offers on real estate that seem crazy for 18 years. Ladies and gents I am willing to share the love of my life with you. Maybe its polyamory maybe its jut because I can’t shut up about it. Either way I will be sharing every mistake I ever made and the lesson that came from it. I love questions. Please ask away!!!