House Flippers’ Checklist for Real Estate Financing
If you’re among the many real estate investors who are attracted to the idea of becoming “house flippers,” you’ll find the practice to be interesting, challenging, and potentially financially rewarding. However, the standard house flip is not anything like a 30-minute reality TV program. In fact, each transaction you take on will present its own unique challenges and issues that affect your ultimate profitability. That makes it important to be as methodical and consistent as possible when you set out to buy, renovate and sell a property.
Doing It by the Numbers
To help you achieve success in your house-flipping ventures, we’ve provided below a few key points to always consider. You can use this as a start for your own detailed house-flipping checklist, covering everything from finding a property to securing the best real estate financing. You’ll find this list will grow with every deal, and the more complete you have it, the easier your projects will be to execute.
The bottom line for house flippers is, of course, the bottom line. It’s all about making a profit, not falling in love with a home or investing more time and effort than the return justifies. For example, developing the best sources for real estate financing will be easier when you show a consistent record of finding and selling properties that make solid economic sense.
While you will want to add detail to each of the points below, the topics listed are the areas you want to include on your own checklist:
- Property Targets
- Develop the criteria for your “ideal deal” based on the initial price, amount of rehab needed, amount of real estate financing required, time to complete the buy-rehab-sell cycle
- Check with local lenders to determine their willingness to provide real estate financing for your targets if you don’t have your own capital.
- Market research
- Determine the areas of your city that present the best opportunities for flipping
- Get to know the general trends and economic factors for your target areas
- Establish contacts with active realtors who can help you find the right properties
- Farm the areas with business cards and other methods to let potential sellers know you
- Property Inspections and Rehab
- Train yourself on the current local costs to perform all types of repairs and rehabs for the houses you buy
- Find local vendors and tradesmen who can provide the services you don’t want to take care of yourself.
- Learn which improvements and rehab steps cost the least money while producing the greatest potential return. These include:
- Increasing curb appeal (trimming trees, replacing screens and shutters, adding shrubs and flower, etc.)
- Removing smells from/replacing old carpet and drapes
- Do a thorough washing and cleaning of the interior, painting when necessary
- Replace/clean filters, leaky faucets, clogged drains
- Update less expensive items, such as faucets and doorknobs.
- Conduct a thorough inspection of every potential property. Evaluate the level of and cost of repair, cleaning, or replacement of each item required, including:
- Roof and gutters
- Masonry and brickwork
- HVAC equipment
- Hot water tank
- Kitchen appliances
- Plumbing and sewer
- Electrical and fixtures
- Floor coverings and window treatments
- Landscaping and other exterior work, such as fencing
- Basement leaks/issues
- Insulation in attics and other areas
- Prepare your financial review
- Use a spreadsheet to calculate all costs and expected sales price to calculate the potential profit.
- Determine the best form of real estate financing
Work the numbers and build your house flippers’ checklist. If you follow a disciplined approach to finding and rehabbing the right properties, you will find house flipping to be the rewarding experience you desire.