Advice on first flip

[Austin Latty]

Hello BP,

I have finally started taking big action and not trying to have the whole process figured out before moving. I have just gone under contract on my first investment property, and will be flipping it. I have read J Scott's book on flipping houses, and have followed that as a step by step blueprint. I have budgeted an extra 20% on rehab because I know unexpected things will come up. What are the biggest things you wish you knew while doing your first flip? What are the things to look out for that may not be as obvious as contractors not showing up etc. I am using hard money to purchase, and set up an LLC so I could get the loan. Now that I have an LLC that I will be purchasing the property in, what kind of stuff should I be doing to prepare for taxes etc. I am a W2 employee that makes about 70K per year, so this is all new for me. Im very excited to get started, and for the future I am building for my family. All your input is greatly appreciated. Have a great day!

[Shawn Parsh]

Austin,

Congratulations on your first investment. I agree with the other comments that having a CPA on your team is important. In addition to keeping track of all your expenses and saving receipts I would track all of your business miles driven. 

Some things I would suggest as you get started. First do not use skilled labor for unskilled work. If the house needs old cabinets, carpet, fixtures and so on removed I would not use a general contractor. Keep track of each step in the project and what it is going to cost. For unskilled task I would hire a handyman. 

Ensure timelines are discussed and committed to early. Get advice from competent people (realtors, appraisers, fellow investors in the area) early in the project. Determine what rehab items should be done to maximize profit. Sometimes you can add a feature to the house that is nice to have, but after the cost of adding it you break even with the added value. If it doesn't add income to your wallet after the expenses do not take the time and money to do it. Don't remodel the house with your taste and desires in mind. Instead take advice from those in the business on what buyers want and will pay for. Finally, stay engaged with the project. When you do not understand something that is getting done ask someone to explain it. The more you learn on this flip the better you will be on the next. Good luck.