More and more people are now seeing the opportunity in flipping homes. With today’s low interest rates who wouldn’t take a leap of faith and try out this type of investment. Before you dive in though it is always good to be as knowledgeable as possible and learn about common mistakes made by people in this industry. That is what BVM Contracting’s goal is, to give you the peace of mind in knowing everything there is to know about home renovations and the residential construction industry.
The first step in flipping a home is buying a property (usually if the property is in the city there is already a house on the property). The tough part about this is finding a property that is both cheap and profitable. The ideal situation is finding a bungalow that needs a little work with an unfinished basement in an up-and-coming neighbourhood, but usually only one or two of those criteria are feasible. So the idea behind this part is to aim for the stars but to not be upset when you come up short.
The second thing one needs to do is find a solid contractor that will help along the way from the first flip to the last one. Finding a great contractor that can do this is a hard task. There are too many contractors who either have no idea what they are doing or just want your money. The way to find a stellar contractor is to do your homework and ask around; ask everyone and their uncle. This is a way to cross-reference contractors and make sure their work is consistent. Another way to weed out the bad contractorsis to see if they have a website, and even if they do have a website do extra research. This part is very important as the amount of profit you make depends upon the efficiency of the contractor.
Another big decision that home flippers have to make is whether they want to add asecond story addition or extend the house. Depending upon the size of the home and your budget, you may want to even change the layout of the existing home and external features without changing the size of the house. Most homes that BVM contracting has helped flip have mostly been second story additions, as are most flips in Toronto. Nonetheless, for either way you decide upon going, you will have control over the features of the house including the layout. That means that you will have towork closely with an architect in order to achieve the right design you are looking for.
Once the drawings are in and the permits are granted it is now time for the contractor to take over and help make your property profitable. This can take anywhere from 4-8 months depending on the complexity of the renovation.
Once the renovation is complete it is now time to get the home sold! In this phase of the flip you can go about selling the house in a few different ways. One worthy piece of advice is to definitely stage the house; what this does is it gives people a sense of comfort in the house and they can actually picture themselves living there. Another piece of advice is to not use a real estate agent unless you have to. The reason for this is because they eat away at your profit by charging a certain percentage for selling the house. Most times the percentage they charge is unwarranted for the job they did. If you are in that up-and-coming neighbourhood or believe that your house can sell itself (which it will because you designed it) try to sell it yourself or through a commission free real estate service.
Once you figure out how you are going to sell your house, in a few weeks your flip will be sold and you will be ready to start another!
As a word of caution, if you are in the home flipping business with more than just yourself it is a necessity to make sure any agreements you make with your partner(s) is in writing. No matter how close you are with someone you should do this, consider it a safety net just in case things turn sour. Even if your business partner is family, that does not mean you are safe from the potential turmoil caused by that ‘gentlemen’s deal’ you made with them.
Another thing to point out is that not all flips will make you money, it is important to understand that there can be factors out of anyone’s control that could put you in the red. It is important to realize that with all investments there also some risks involved. Although, if you find a good contractor and do your research that should be able to reduce the risk significantly.
About the Author
Business Development, BVM Contracting
A graduate of chemical engineering from Queen's University, Ryan has spent many summers working with BVM Contracting in various roles and projects. This experience has provided him with a unique view on the residential construction industry which he loves sharing with you!