Tips for a Successful Fix and Flip Project

If you’re well versed in fix and flip real estate projects, you likely already know what it takes to pull it off successfully and generate a profit. If not, there are a few things that might be helpful to know to get the project off the ground and keep it moving forward smoothly. Knowing what to expect can make the outcome successful, with fewer surprises or unknown costs that can undermine your profit.

Fix and flip projects can be both profitable and time consuming. Your initial financial investment, your scope of work, and your time commitment can all make a big difference in your bottom line.

Let’s dive into a few fix and flip tips for a successful project.

Create A Timeline

Every great project begins with a plan. Step one has two parts. The first is creating a budget, and the second is establishing a timeline. Basically, how much is this project going to cost? And how long is it going to take?

We help organize budgets for flippers, ensuring things generally flow in a consistent order. Knowing what your budget will be for each stage of the operation helps you to stay on track with both your money and your time. 

For example, your timeline might look something like this:

1. Demo property, clean out space, conduct asbestos/mold remediation if needed
2. Upgrade exterior: roof, foundation, windows, and siding 
3. Interior rehab: structural changes, framing, insulation, drywall, plumbing, and electrical
4. Bathroom upgrades: toilets, showers, tubs, and sinks
5. Update cabinets and counters
6. Paint interior and/or exterior  
7. Replace flooring 
8. Finish doors/trim, door/cabinet hardware, bath/kitchen fixtures, install light fixtures, and move in new appliances
9. Final touches: caulking, landscaping, and staging

When you look at the house you just bought, it might be overwhelming to know what needs to be done and where to start. By using a timeline or checklist like this for projects, you can plan ahead effectively. You may find that not everything will need to be repaired or replaced.

Once you have an idea of what you’re going to do, you can set a realistic timeline for how long it’s going to take. Most of the time, it’s going to take longer than you think. Sometimes contractors take longer than expected, some materials may be hard to acquire, and even weather can derail your best laid plans. It’s going to be helpful if you can remain flexible and give yourself some room to expect the unexpected. 

For example, our borrowers commonly report that items like custom windows, countertops, or cabinets can often take several weeks to be delivered. Then they need installation. Plan ahead and order things like windows in the beginning so you’re not stuck waiting for them to arrive and delaying everything else as a result. 

Selling a house takes time too. The typical traditional closing process if the buyer is using financing is 30-45 days. You should also factor in the additional time it takes to find a buyer. Consider your market and your listing price point. If you’re above the average home price in the area, it will typically take longer to find a buyer.

It’s great to enter into any project with a positive attitude and hard working initiative. But it’s also important to have a clear sense of reality. While having absolute certainty that you will be successful is imperative, you also need to know that things can come up that throw you off balance, so being prepared for anything will help you in the long run.

Compare Costs

When considering costs, it’s important to compare the prices of materials used in your renovations. Property location and comparable properties in the neighborhood can influence the types of materials used in your fix and flip project.

Flooring is an excellent example. Real hardwood flooring costs more than vinyl, but if the house you’re flipping is in a nicer area, you may need to step up to the more expensive option. The buyers you are wanting to attract would recognize the quality of the materials you have used in the home. Cutting costs by using cheaper materials may not be the best choice in every flipping situation. Consider whether it’s going to make the property easier or harder to sell, and consider if the low-cost option could potentially dissuade buyers.

For lower price points, it’s still a good idea to get quality products. People know when something looks cheap or isn’t aesthetically pleasing to the eye. Consult with a realtor familiar with the area to determine what upgrades would be appropriate and which ones aren’t worth it. For example, you may consider whether or not to pay $3,000 for granite or quartz instead of $1,200 for laminate. In some locations, stone sells much better. In other locations, laminate works just fine.

In any case, plan ahead with your labor costs. If hiring contractors, avoid contractors that estimate or bid with general and vague figures, such as “I think it’ll be about $20,000 total” or “The bathroom remodel will be $5,000.” That’s an easy way to end up with a surprise bill in the end when they inevitably spend more time than they thought. Specific is terrific, as they say. Use a contractor who you trust to give accurate estimates for specific budget items, not general figures or guesstimates.

Doing great work, regardless of which end of the pricing spectrum you’re on, is always important. What type of finished product you build and who you may choose to do the work also depends on the area and the buyers. In other words, read the room, or in this case, the neighborhood.When making a plan for your fix and flip project, know the neighborhood, the buyer, and the type of house that fits the profile. From there, comparing costs of materials that match the project is an effective way of creating profitable real estate.

Calculate Profit

The real goal in any real estate project is to make a profit. Selling a house that you put a lot of time and effort into can be rewarding, but it’s important to calculate your expenses, starting at the beginning, to make sure that sale is a successful one.

You might think that you make money when you sell a house, but really it’s when you BUY the house. Purchase price is critical because if you pay too much to start with, no amount of rehab is going to compensate you in the final sale.

Budget everything. Don’t leave anything out. The cost of fixing the house is not going to be the only expense you encounter during your fix and flip experience. You’re going to need to have electricity and water at the home throughout the renovations, so you’ll be paying monthly utility bills while you’re working there. Things like property taxes, interest expense, lender fees, title fees, selling costs like realtor commissions, and HOA dues all need to be considered when calculating a profit. And don’t forget about Uncle Sam’s share of your profit either!

If you need help calculating your potential rehab budgets, check out our Rule-of-Thumb Rehab Estimator.

Fix and flip real estate projects can be a profitable investment when you take the time to plan and calculate what it’s going to take to get it done. 

At Cetan Funds, we have knowledgeable staff and helpful tools that can help you make the right decisions for your next real estate investment. While fix and flip projects can be a lot of work, they can also help you build wealth through real estate. 

Reach out to us about your idea for a fix and flip project and let’s see how we can help make this the most successful real estate project in your portfolio.