When done right, rehabbing a house can be a profitable venture. For example, former shoe salesman John Irvin told The Washington Post that he used to earn $20 an hour in that profession, but now he flips and rehabs houses and has earned a $30,000 profit on each of his first three houses. However, successfully flipping and rehabbing a house requires restraint and wisdom.
Biting Off More Than You Can Chew
If you’re new to the flipping market, start out with a house that only needs simple repairs, like paint, new carpet and new appliances, according to the website House Flipping School. These minor rehabs should only take a few weeks, and can be done for a minimal amount of money. Until you gain more experience, don’t take on massive projects like replacing the roof or handling foundation repairs, or you may end up with more than you can handle.
Failing to Get Multiple Quotes
Solicit several quotes from various painters, electricians, plumbers and other contractors, and also check their references to ensure that they have other satisfied customers. While ultimately you want the best price, it’s just as important to use reputable workers who will do quality work. While cost overruns are unavoidable, once you agree upon a price, hold the contractors to staying within the original price quote as much as possible.
Going Over Timelines/Budgets
Rehab expenses can add up quickly and failing to keep track of them is the fastest way to go over budget. Also, make sure that the budget includes a cushion to pay for unavoidable cost overruns. In addition, most flipped houses are financed by a third party and the longer it takes you to finish rehabbing the home, the more money you spend on financing payments and carrying costs. According to House Flipping School, that’s why new flippers should start with modest rehab work. Starting off with large projects could lead to unexpected and time-consuming surprises that can eat up potential profits.
Spending Too Much on the Kitchen
Although the kitchen is one of the most important rooms in the house, it’s also the room on which you’re most likely to overspend. Granite countertops and professional-grade appliances make the kitchen stand out, but John Bredemeyer, the spokesman for the Appraisal Institute, told CNN Money that a renovated kitchen is limited in the value it can add to the price of a home – usually only 5 percent to 15 percent. Therefore, you should spend no more than that percentage on rehabbing the kitchen. Consider using laminate countertops and either laminate or vinyl flooring, and then reface or repaint the kitchen cabinets.
Adding Your Quirky, Personal Touch
When rehabbing a house, don’t forget that this is not your home, so it should not reflect your personal sense of style. While you may love vessel sinks, black and white checkered floor tiles, and red paint color, potential buyers may disagree with your choices. Neutral colors and styles will appeal to the widest variety of consumers and increase the chances of a quick sale.