There I am, binge-watching another home renovation and design show on HGTV – a last commercial break and I head to the fridge for that “healthy snack.” As I settle back in for the big reveal with the homeowners, I laugh to myself. Before the commercial the house was just in its finishing stages, now the home is perfectly staged. The lighting has been set to perfectly highlight the chrome or brass finishes. Even the hosts of the show are dressed to the 9’s – hair and make-up teams have clearly been deployed. This is not reality.
One purpose of my blog is to show you what happens during that commercial break. What home renovation and design are like without a crew of interior designers, painters, a personal carpenter, an unlimited supply of sponsors who provide staging furniture, and editors who neatly tie an entire home renovation into a smooth 30-minute segment.
Flipping a home is tough, dirty, unglamorous, financially risky, and stressful. However, when it’s your passion, it is all worth it when your vision is executed and you are successful. For many years I fulfilled my passion part-time. During this time working in real estate I renovated and designed 9 homes, some I’ve lived in briefly, others were investment properties- each one was sold for a profit. In 2019 I finally took the plunge to live out my passion working solely in Real Estate which has provided me an opportunity to use my experience and knowledge to help those with their real estate and renovation/design needs. COASTAL-Home Renovation & Design which began as a labor of love has now blossomed into a fulfilling career.
Think you want to give it a go? Here are my 9 major things to consider when looking for a property to invest in with Potential Market Power (PMP)
- 70% Rule. The average amount of return you make on flipping homes is usually small. So if you are ready financially, physically, mentally, take this risk know the average reward margin is small. 70% Rule says tale 70 percent of your (ARV- After Repair Value.) This number includes what you paid for the house plus repairs.
- Cash is King- You can finance an investment property and still make a profit. I’ve done it- but remember paying monthly interest on a property is taken from the profit.
- Real Estate Fees- If you are not a licensed realtor you are going to pay approximately 6% to buy and then 6% to sell the property.
- Closing Costs- When buying and selling a property there are closing costs associated with both sides of the transaction which average 3-5% of the purchase and sale. That is money that is taken out of your profit.
- Know your numbers– Math? Yes!! Did you remember to add 10% to your renovation cost? That the amount you need for the unknown. Tracking all your expenses. If you’re not tracking every cost- you will not make money. If something costs more than expected-you have to find ways to cut from other areas of the budget.
- DIY, Recycle, & Reuse- I am all about doing the work yourself to save money, however, Be very careful on which projects you decide to do yourself and how much are you really saving. Time=money. Look at creative ways to recycle and reuse material that you are removing from a property.
- Garbage Removal – Besides gutting homes and clearing debris from properties –what about garbage produced from the investment? Wood deliveries come on wooden palettes, deliveries come with cardboard, packaging, styrofoam, plastic, empty paint cans, brown flooring paper. This removal takes time and costs money.
- Comparative Market Analysis- If you are not a licensed realtor, you need to know have one do a CMA of the area you want to invest in. If you don’t begin with a realistic end number in mind you will not make a profit
- Create a team- Sourcing reliable, licensed workers takes time. You will need to find a General Contractor, an Architect (depending on the project), an electrician, a plumber, a landscaper, etc….the list of people you need to hire and work with takes time to hire.
So next time you are binging your favorite renovation show–See if they ever mention any of my tips for successfully selecting a property to renovate. I’ll leave you with some unglamorous renovation pictures.