Re: Advice For Your First Flip
If you live in the real world and want to be honest with yourself, it’s safe to say that on your first flip, you’re probably going to make a few mistakes.
In the next 60 seconds, let’s reduce that number of mistakes even more. And hopefully, tuck a few extra dollars into your bottom line.
Here is the number one thing that you have to get right if you are flipping a house here in the DC metro area:
Ok, this is a little tricky, because there are actually two prices you have to get right.
There are two sides of this “Price” coin:
The price you pay for the house and the price at which you sell the house.
If you get either one wrong, there can be huge consequences. Spend too much when you buy it, or list it for too little and you won’t make a profit.
However, if you have a rising market and keep your mistakes to a minimum, you could actually walk away from closing with more money than you expect. (Lot’s of people think they are brilliant renovators, but in the last few years they have been the lucky recipient of a rising market.)
Back to these two prices. They can be tricky.
There are a lot of factors that go into flipping a property, but I’m going to assume you can get estimates on the paint, carpet and cabinets. So let’s get a little beyond those basics.
Beyond the cost of the materials and labor to have the proper repairs, where are the hidden expenses a lot of first-time flippers forget?
Let’s cover the top three items first time flippers forget that really take a bite out of expected profits.
Here in DC, we live in a high tax area. Period. When you buy and sell a property the transfer taxes and property taxes can eat into as much as 4,5 or even 6 percent of the transaction. Maybe MORE if you take a long time to turn the property around. On a simple 200k property, these taxes might add up to as much as $8, $10 or even $12 thousand dollars.
2. Insurance and Utilities
You have to insure the property, especially when you turn on electric and water. Even a small electrical fire or a cracked water pipe can cost hundreds or thousands of dollars. And we are not dealing with homeowner insurance rates when we flip property. The insurance companies are going to charge more than a homeowner because they know the house will be vacant a large amount of the time you will own it. Additional risk for them means higher rates for you.
3. Sales and Marketing
Sales and Marketing is one expense most people assume an agent will take care of. However, if you can add to the sales process by assisting in catered open houses or additional mailings to prospective buyers, you might be surprised how quickly you can get these properties sold. It’s a team effort, and when you offer to chip in for additional TARGETED marketing your sales team will be grateful.
These three items should always be factored into the price of buying and selling a property in the DC metro area. Especially the taxes. So many first timers are surprised how much it costs just to DO the transaction.
There are a few more tricky or hidden expenses we will quickly cover at our next WREIA meeting on Oct. 16th. Being aware of them will help put more money in your pocket at closing.
And on Oct. 16th, we will cover so much more…..
If you want to learn how to make money flipping houses in the DC area – in 2017, ’18 and beyond – join us at WREIA on Oct. 16th.
I’ll give you a roadmap with action items you can take and put to use as soon as you leave the room.
If you are ready to get to work – Join me on Oct. 16th.
WREIA 2017 Oct. Meeting
Monday, October 16th
Doors Open @ 6:30PM
“How To Flip A House In Any Market”
Reserve your seat by clicking here.
Founder, Washington REIA Network