When you see a video presentation about a house flip on TV, it looks simple. Of course something inevitably goes wrong in the middle of the episode for dramatic effect, but the homeowners overcome every misfortune somehow and turn a major profit.
How hard could this be to replicate in real life? Well, as anyone who has tried a house-flipping project on his own is aware, it can actually be pretty challenging. It can be tough to come in under budget to ensure you turn a profit.
Seven Ways to Save Some Serious Money
Some house-flipping projects simply involve a new carpet and paint, but others require you to bust down walls, repair the roof, replace the windows, and overhaul lots of tiny design details. Regardless of your scenario, here are some practical ways you can save money and boost your profit margin:
1. Calculate the ROI Before Doing It
You should never invest in a home improvement project for your house flip just because you think it’ll look good or help sell the home. Before doing any project, big or small, crunch the numbers and come up with an anticipated return on investment (ROI).
One good tool to reference is the annual Cost vs. Value Report, which compares the average cost for popular remodeling projects in nearly 150 markets around the country to determine the value they represent on resale. This will tell you whether a potential renovation is worth pursuing, as well as how much money you may invest into the projects you take on.
2. Hire High School and College Students
Certain projects must only be handled by licensed contractors, but in the early and late stages of a house flip, you might save a considerable amount of money by hiring high school and college students to perform manual labor at $10 an hour.
For $200, you could bring in four strong guys and have them rip up carpet, knock down walls, and haul off trash for five hours. It would take you a couple of days to do all of this on your own. So that should feel like money well spent.
3. Buy Your Own Materials
One of the major expenses in a house flip is the purchase of materials. If you can find a way to cut down on some of those costs, you’ll have a much better chance of coming out of the project with a healthy ROI.
“Instead of paying your contractor to supply labor and materials, consider having him only supply the labor,” investor Jim Ingersoll advises. “This way your materials don’t get marked up, and you can be confident in the materials being used at your houses.”
4. Try Buying From Recycle Stores and Craigslist
If you aren’t picky about the precise materials you use, cosmetically speaking, you can save a bunch of money on a house flip. Try checking out the local building recycle stores and/or browse online sites like Craigslist for building surplus materials.
You might be surprised by what you can find at such places. Sometimes you can get quality materials, including countertops, vanities, sinks, doors, and light fixtures, for pennies on the dollar.
5. Focus on the Money Rooms
You can waste a lot of funds on projects that don’t add any particular value to the house. If you want to maximize your budget, lower your costs, and increase your ROI at the closing table, focus on the money rooms. These consist of:
- Kitchen. This is the first room most people want to see. Some stainless steel appliances, nice countertops, and a trendy backsplash will tend to give you a positive return on investment.
- Master suite. After the kitchen, the next thing prospective buyers typically seek are the master bedroom and bathroom. This is another highly cost-effective place to spend your money on nice finishes and eye-popping design.
- Outdoor living. Though a lovely living room is essential, outdoor space is what tends to set a good house apart from an average one. Spruce up the deck or patio … or add one if your property currently lacks it.
Other rooms obviously pay to be addressed, but the above items are where the majority of your budget should go (at least in cosmetic terms). So long as you know your market and don’t price yourself out of the neighborhood, you’ll get your money back on these improvements.
6. Invest in Landscaping
First impressions matter a lot in home sales. A bad first impression is hard to overcome, while a good one will set the tone for everything that follows.
For great curb appeal, invest in some quality landscaping. At a cost of just a few hundred dollars, you can transform the entire look of your property. Consider pressure washing the hard surfaces, repainting hand railings and trim work, pulling weeds, trimming shrubs, and planting flowers.
The key is to wait until the very last minute to do these things. You don’t want to start too early and then have to return to pull more weeds or plant more flowers after they’ve been trampled by your work crew or pressured by any extreme weather.
7. Speed Up Your Timeline
“Most newbie flippers who use financing often forget to factor in holding costs into their budget,” broker Christian Ross notes. “The holding costs include mortgage payments, utilities, any homeowner association (HOA) fees, and landscaping maintenance — these should all be factored into their budget. If you forget to include these costs, you might end up short on cash.”
More than including these items in your budget, you should regard them as motivation to speed up your timeline and work fast. The longer you hold a house, the more money you’re likely to have to surrender for such expenses. The sooner you sell, the greater your profit will be.
Work With Green Residential
When it’s time to sell or rent your real estate investment, Green Residential is here to help. In addition to our comprehensive property management services, we assist Houston homeowners and real estate investors in saving money on the sale of their homes through flat-fee commissions.
To learn more about how we can serve you, please give us a shout!