Starting Out? Here is some tips on what to look for(FLIPS!)

[Elise Bickel Tauber]

I've been doing this a long time and I get asked time and time again what tips I have for new investors when it comes to flips. Here are some of my top tips!

1. Before you start trying to guess what the renovation costs would be, start by analyzing ARV comparables and use the middle of the road number, not the top. I see so many investors see comps and decide that their property is going to be that one in a million and be worth the same or more than the highest comp. You might be right, but do not plan for this. 9 times out of 10 it wont be. Also, if you don't plan for the top and the market softens you will already be better prepared for the resale.

2. When you start looking at renovation costs, always plan for 10-20% higher then quoted when everything is said and done. I can promise you that even the most thorough inspections with the best contractors doing the work are still going to, more often then not, have add-ons along the way. Things always go wrong. If your numbers only work if you 100% stay to budget, then you might want to just walk now. You will have to make sacrifices to stay in budget or loose your entire profit margin. 

3. While we are talking about contractors, be sure to vet your contractors. My husband and I own a renovation company and I'm not going to lie, we have had some struggles along the way with employees not working to the quality level we require or high turn overs causing delays. If we have struggles and headaches with our own employees, imagine what you can run into when you are looking for a contractor in another state or across the country who has no loyalty to you? A few red flags include contractors who take forever to respond (I don't mean hours, I'm talking a week or two to get a yes or no), contractors who are priced significantly lower then all your other bids (these contractors can sometimes run off with your deposit money), and those with only 5 star reviews. While the last one may not be an absolute no-go, it is something to be observant of. Even the best contractors have made mistakes or disagreements with clients in the past. What you want to see is the way those contractors responded to reviews that aren't 5 stars or when questioned about those circumstances have a humble response with a growth mindset on how they have grown as a company to avoid that type of issue in the future.

4. Create a team and make sure they understand your vision. Select your team including a real estate agent, closing company, construction company etc and make sure they know your intentions for the project including timelines, ARV goals, etc. If you are looking to create and build a team with everyone on the same page you are going to have a better mindset throughout the project.

5. The big 3! I hate to say this but no matter how good the numbers look, expect to make absolutely no money on your first 3 deals. I know a lot of lenders who say the magic number for when they stop being so strict with financing and loan margins is 3 deals. The first 3 are going to be tough. You most likely will learn more on these first 3 than any other deal you do. While most investors do make some money their first 3 deals, if you plan to make nothing at all, then any profit is a bonus. Your goal on the first 3 deals is just to learn and hopefully, get whatever money you have put in back. 

Remember, at the end of the day, if you work hard and educate yourself, real estate investing can be very profitable and extremely enjoyable and rewarding. Taking a home or multiunit that is absolutely trashed and turning it into a beauty is so much fun. I hope my tips can help some of you on your way to financial freedom!