No one wants to invest time, money, and effort into growing a successful real estate flipping business only to lose it all to a tarnished reputation. Flipping a house requires a certain standard of quality -- from the planning and underwriting stages all the way through execution. Adhering to this standard will not only help the home sell faster but also provide a quality finished home for the end buyer and leave you with a five-star rating instead of a one-star review.
But with more people jumping into the fix-and-flip game as home prices appreciate at record rates, shoddy flipping work is naturally an end result. To help save your reputation, here are five best practices you should follow.
1. Put quality first
Quality should be seen throughout the flip -- from planning to materials and execution. When taking on a flip, you should have a good idea of what the local real estate market demands in terms of finishes and design. This will help you estimate the cost of the renovation based on what the neighborhood standards are for materials.
For example, in a lower- to middle-class neighborhood where laminate countertops are the norm, there's no reason to splurge on a higher-quality countertop. However, if you're in a more affluent neighborhood where quartz or granite are expected, you need to deliver.
Knowing what the market demands cannot and should not be an afterthought. Choose your materials carefully, and then make sure the work installing these materials is held to the same standard of quality. No one wants to see shoddy craftsmanship.
2. Pay attention to the details
I toured a recently flipped home for sale in my family's neighborhood and instantly noticed how poorly done the work was. The quality of the materials was great. They chose nice paint colors, beautiful tile for the bathrooms and kitchen, and nice granite countertops, but the finishing work was terrible.
Clearly, the contractor or flipper was trying to use up old tile and flooring from past jobs and chose to install six different types of flooring, even in common areas. The baseboards were missing, there were tons of paint drips and splotchy patches on the walls, and the layout of the newly renovated kitchen was in no way user-friendly -- the countertop was below my hips! My red flag alarm instantly shot up for other problems that could have and likely were overlooked.
Having smooth, even paint colors -- without drips or spots on the ceiling or floorboards -- cohesive flooring in common areas throughout the home, matching light and outlet covers, and updated light fixtures or fans throughout the home makes a huge difference in how it's perceived at first glance. While minor in detail, finishing touches are often what either helps the home sell or leads to it sitting on the market.
3. Put your money where it matters
There's a time and place for cutting corners. Accurately estimating costs before you buy will ensure you don't have to cut too many corners, but putting your money where it matters most is hugely important. Things like the HVAC, electrical, plumbing, and roof will go a long way in terms of return on investment. It also means you've addressed some of the biggest and most expensive challenges a homeowner may have to face down the road.
I recently completed a flip during which I was able to cut a lot of corners while still delivering on quality. For example, in the kitchen, I chose to replace the countertops with beautiful granite ones, replace all hardware and the sink, and update to stainless steel energy-efficient appliances. But instead of replacing the kitchen cabinets, I painted them. The room felt brand new because I put my money where it mattered most in the kitchen.
In the bathroom, I chose to reseal the tub and tile rather than replace it. It turned out beautifully and gave the bathroom a fresh new look while falling in line with the neighborhood's expectations for quality. It also saved me around $2,000. But I didn't skimp on the important things. I replaced the HVAC system and water heater, updated the electrical, and replaced the roof -- tackling the major and most expensive costs a homeowner will look at first.
When you purchase the home, an inspection will help you determine whether any major items will need to be replaced or repaired, but it's always a good idea to have an additional reserve to cover unexpected repairs.
Before you tear down that wall, you may not know that the electrical needs to be replaced, but you could find old knob and tube wiring that hasn't been replaced properly. Don't ignore it. Address it and make sure it gets repaired to the standard of quality expected today.
4. Plan, then plan some more
When you go into a flip, you should have a solid plan surrounding what exactly you're going to do to the home. This is especially important if you are moving walls, rearranging layouts, or converting rooms. Many times, it's easier to leave the floorplan the way it is, but a lot can be said for going the extra mile and rearranging layouts to better reflect market demand and design trends.
Layout shouldn't be an afterthought. Think about where the dishwasher will go in relation to the sink, how easy it is to access the fridge, or whether there is countertop space next to the stovetop. Make sure outlets and light switches are easily accessible for use as related to their function in the room.
Big changes, including removing or adding walls, may require an architect's involvement, particularly if the wall is load-bearing. This could be a huge additional cost if you thought it was simply a tear-down wall.
While these types of changes can be done in the middle of the renovation, you always run the risk of going over budget and being forced to cut corners down the line to compensate for the changes. Plan -- and plan carefully. Think through every detail and keep useability and function at the front of the planning process.
5. Work with reputable contractors and tradesmen
One of the most challenging but important aspects of a successful flip is finding the right contractors to complete the job. Finding someone who is licensed and has a strong reputation can be tough, especially if you're on a timeline. Good contractors are usually booked solid. You may have to experiment with different contractors based on availability. In this case, it's crucial that you monitor their work to ensure it's being done correctly.
For instance, you must ensure the air conditioning unit isn't installed too close to the home or that a tree added to the landscaping won't cause foundational issues or problems with the plumbing down the line.
Or if the electrical is being replaced or updated, make sure the replacement panel is the proper size and that the old wiring is removed before resealing and drywalling the walls.
If installing a shower, ensure the proper water-barrier lining is put in to prevent seepage or leaks and that the drain is installed so that the water actually drains downward and doesn't pool in the corner.
And if you don't have the personal knowledge to identify these things, have a reliable person you can trust check them for you.
The Millionacres bottom line
Remember, as much as the jobs being done are the responsibility of each contractor you hire, you're the one responsible for their work. The homeowner will turn to you as the home flipper if they discover big issues. You checked off on the work, meaning it's your reputation on the line.
Make sure you complete the warranty paperwork on all materials that apply and provide the paperwork and warranty coverage for the homeowner. This takes an element of responsibility off your shoulders and shows that you have put thought and care into making sure the quality is there.
While there are always things that can be discovered down the road after you sell a flip -- even things you didn't know existed -- hopefully, these home-flipping best practices will help preserve your reputation and make your flips sought-after buys in your market.