Flipping houses can be a highly profitable way to invest in real estate, but there's plenty that can go wrong and eat up your profit margins. That's why it's incredibly important to assemble a winning team to back you up.
Having the right house-flipping team can make the difference between consistently hitting or exceeding your profit targets on your deals and losing money more often than you make it. With that in mind, here are six professionals you need on your house-flipping team in order to set yourself up for success.
1. Real estate agent
Many house flippers are licensed real estate agents, and it's easy to see why. Selling commissions can easily reach 5% to 6% of the sale price, so it can be a big money saver, especially for frequent flippers.
If you're not a licensed real estate agent, you need one. Sure, you can buy and sell a property without an agent, but it can be much more difficult. Your real estate agent can help get everything in order so you can sell the house quickly, and they can do it while your attention is focused on getting the project done. And, a great real estate agent will have an intimate knowledge of your local market and can guide you accordingly. Plus, an experienced real estate agent can be a great source for potential fix-and-flip projects that might not be listed on the MLS.
Last but not least, a real estate agent can be a great source when it comes to finding the other team members on this list.
2. Home inspector
One common mistake newer investors make is assuming that they don't need a home inspection if they're planning to do extensive rehab work or if they've agreed to buy the property as is.
Inspections are still very important for fix-and-flip investors because they let you know exactly what you're getting into. Imagine if you had planned to paint, put in new carpet, and renovate a kitchen -- only to find that there are serious structural and electrical issues. It's always a good idea to have an inspection done before you're committed.
Before you get involved with a fix-and-flip project, you'll need to know how much your repairs are going to cost. For this reason, it's important to have a contractor you trust who you can call. Ideally, you'll have estimates before you even put an offer in and can schedule work to begin as soon as you close. Remember, time is money when you're flipping houses, and a delay of just a couple of weeks getting started could cost thousands of dollars in holding costs.
4. Mortgage professional
Generally speaking, most mortgage lenders don't make fix-and-flip loans. You can't just walk into your local bank branch and expect to finance 80% or more of your next project.
For fix-and-flip loans, you'll need to go through an asset-based lender or hard money lender. The good news is that you can find reputable fix-and-flip lenders that will finance 80% or more of the purchase price and as much as 100% of your rehab costs.
Having a good relationship with a lender can be a major asset to a house flipper. For one thing, getting things done quickly is very important when trying to flip houses. You want a lender who can close quickly. And, you want someone who treats you like a priority and goes out of their way to be responsive. While you can certainly shop around for a lender every time you find a property to buy, it can be more advantageous to have a go-to lender that you've built a relationship with.
5. Real estate attorney
It's a good idea for any real estate investor to have an attorney they trust. Hopefully you'll never need their services beyond assisting with closings, but if you do, an attorney who has lots of experience with fix-and-flip investors can be a very valuable asset.
If you don't know where to start your search, your real estate agent can be a great source for a good attorney. In fact, that's how I found mine.
6. Insurance agent
Fix-and-flip projects generally can't qualify for standard homeowners or landlord insurance policies, but you still should make sure you're covered in case a fire or other catastrophic event happens. You might need vacant property insurance, or a builder's risk policy might be more appropriate while repairs are taking place.
For this reason, it's important to have a trusted insurance professional who can help you determine how much coverage you need and what type of insurance you should hold at each stage of your project.
The Millionacres bottom line
As a fix-and-flip investor, you could be the best at finding great deals, but your financial success will depend a great deal on the team members you surround yourself with. Construction delays can be costly, and if you can't get financing quickly, you're likely to lose some deals. An all-star team can be the best asset in your fix-and-flip toolkit, so choose yours wisely.