The Truth About Flipping
Wednesday Nov 03rd, 2021
Many of us are familiar with the plethora of television shows out there that glorify the house flipping process. These shows are a guilty pleasure – trust me, I get it. But the outcomes are certainly not always realistic, so today I’m going to walk you through the TRUTH about house flipping.
What is a Traditional Flip?
Most individuals who are looking to get into house flipping opt for a ‘traditional flip’, which means you purchase the home with the sole intent to flip it and flip it quickly. Scenarios such as this are seen when someone is looking for an immediate Return on Investment (ROI). This process typically takes at least three months and up to one year with the intention of renovating and upgrading the home in the shortest time frame possible and is therefore often referred to as “short-term real estate.” When it comes to a traditional flip, investors often target properties that are found in locations of high-interest and where the real estate market is climbing. With all that said, there is an alternative to the traditional flip.
The Flip in Five
Unlike with a traditional flip where investors don’t generally move into the homes, ‘flip in five’ is just the opposite. The purchaser will intentionally purchase and then move into their investment property, where they will complete gradual renovations over the course of up to five years, therefore significantly increasing the value of the property. This longer timeline from purchase to resale usually means the improvements will be more significant than just trendier changes to the aesthetic. The focus will be on long-standing improvements that won’t fade out with the times and will appeal to a vast number of potential buyers. It’s all about intentional but gradual renovations to get a return on your investment.
A benefit to ‘flip in five’ is the notion that living in the home for a year or so prior to beginning any major renovations, will mean that you will have a much better picture of what should be upgraded based on your first-hand experience of living in the home. It is quite different to make decisions based on walk-throughs and not actually bringing your daily routine into the home. Taking the time to live there will potentially save you money in the long run (therefore making your investment even more lucrative) because you will be less likely to make unnecessary upgrades.
Pros to a Traditional Flip
The most obvious pro to a traditional flip is of course that it takes less time. You won’t have to deal with moving in and out of the property (even if the moves are a few years apart), therefore your life will be far less disrupted. Living with renovations for months or even years can be very difficult, and if you’re not sure that your lifestyle can accommodate that, then I’d certainly be leaning more towards a traditional flip.
5 Tips to a Successful Home Renovation
If you’re leaning more towards the ‘flip in five’ and are preparing for potential renovations in your future investment property, here are 5 tips to ensuring a successful outcome:
1- Put your Vision on Paper
Written plans help to stay focused and are a great way to guide your renovations and timeline. Putting together a project plan that includes everything from your inspirations to your goals and a detailed outline of the work ahead. Consider inclusions to your project plan such as needs vs wants and which tasks should be hired out and which can be treated as more of a DIY project.
2- Get A Second Opinion on your Vision
Whether you bring in your realtor or hire an Interior Designer, a second opinion can help you prioritize your renovations by getting some inside information on which changes will give you the highest and best return for your specific target market. Seeking a second opinion from a professional will also ensure that you are working within the confines of neighbourhood zoning and whether or not the work you intend to do will require a permit.
3- Create a Budget
This could be an annual budget or total budget. Some years may be slimmer financially then others, so it’s best to make this slightly flexible and based on top priorities. This is where the second opinion will come in handy so that you can be sure that your project’s end result has the highest ROI. Do your research and be sure to get multiple quotes for your projects. Whether you’re renovating your home or an investment property, one priority remains the same and that is to avoid unnecessary renovation costs.
4- Annual Review
Life is forever changing and there are a lot of things that can happen over a 5-year time frame. So, it’s important to take some time every year to complete an annual review of your renovation plans and visions - this will help you stay on track! Also, you may find that some years you can afford to spend more and are able to accommodate larger renos such as the kitchen or bathrooms. An annual review is a great way to stay on top of the current state of your home and is also an efficient way to track when and how you can make some of the renovations on your vision list.
5- Hire professionals
It is super important to be hiring professionals when completing your renovations. Make sure that your contractors are properly licensed and insured. Also, be sure to keep records of receipts and warranties in an organized file that you can later pass onto your purchaser. This will set you up for success when you go to sell your home at top dollar. Also, consider using this renovation time as an opportunity to grow your professional network. It is good to have a solid foundation of trusted professionals supporting you in projects that involve perhaps what is one of your largest financial investments, especially if you are considering doing another flip in the future.
At The Listing Agency, I have my own #FlipInFive program and I’d be happy to fill you in on how it works. Feel free to drop me an email through my website or call me directly at 905-977-8358. Having a trusted professional to guide and coach you through your real estate investment journey is invaluable, and I’d love to be your coach!