Investing in real estate during “unprecedented times” is not for the faint of heart. Nevertheless, savvy, seasoned house flippers recognize that this change in the market presents a great opportunity to outbid and outperform the competition — if you keep moving and adhere to your budget.
Consider this your cheat sheet for saving a bit here and there while renovating during Coronavirus. Little differences in your business practices can make a big impact on your bottom line this year.
1. Don’t Stop Flipping or Renovating
The market goes up and the market goes down. It’s easy to remember when times are good, and harder to remember in the face of uncertainty, especially when your TV and social media channels skew to the negative.
But now is actually a great time to invest, provided you have an ample safety net. If you don’t already know, Residential Capital Partners formed during the 2008 housing crisis — when other lenders were closing their doors. There is no room for panic in house flipping. Invest when others doubt.
People are still buying houses. By this May, demand for housing surpassed pre-COVID-19 levels. Which means you should keep flipping with as much cash as you can muster so you can keep turning a profit. Never let a good crisis go to waste!
2. Choose the Right Property
Buy Properties in Great Locations
Coronavirus may have thrown real estate for a loop, but the golden rule still applies: location, location, location. As always, aim for homes of lesser value in neighborhoods that are seeing an increase in value.
Buy Properties That Need Minimal, High-Return Upgrades
Some experienced house flippers pride themselves on snapping up houses that need a lot of elbow grease. Forget that strategy for now. Why? You’re on Corona-time. Which means paperwork and coordinating with contractors will take longer. Store hours are affected. Materials may be on backorder. The project will lag on too long for you to get a great return.
What will get you a better return is updating your kitchens and bathrooms. According to US News, low-end kitchen remodeling in the United States starts at just $4,000. The starting cost of a low-end bathroom makeover is $6,000. That’s pennies compared to large overhaul projects, like wood flooring, a second story or other additions to square footage.
Salvage what you can to keep the character of the home – and save yourself some cash. Opt to paint out-of-date cabinetry, instead of installing new cabinets. See if you can keep existing tile, and replace the toilet, sink, and hardware. Our rule of thumb: low to moderate repairs wins every time!
3. Broaden Your Pool of Contractors
Hire Moonlighter or Student Contractors
The U.S. unemployment rate hit 13.3% by June 2020, which means many workers are now pivoting their careers and transforming their side hustles into fulltime gigs. Likewise, higher education students are without their usual positions: bartending and waiting tables.
Reach out to your network or search sites like Thumbtack and Angie’s List. You’ll find lots of contractors happy to get to work for you. Just make sure they’re credentialed with a great portfolio, and check with references before getting started.
Use a General Contractor
For simple jobs, you don’t need multiple specialty contractors to do the work. Hire a great general contractor and, if you’re flipping multiple houses, ask whether or not they offer reductions for bundling jobs.
4. Save on Materials
Buy Overstocked Building Materials
Local hardware stores will often put new building materials out front and keep overstocked or discontinued materials out back. Find a product you like on the floor and ask a sales associate if they have a similar product in the store warehouse.
Better yet, ask to speak with the manager. Not only will they have more in-depth knowledge of their supply, but they also have a vested interest in clearing out overstocked materials in the back to make way for new merchandise. They’ll be more than happy to sell you discontinued products for a fraction of the cost.
Buy Builder’s-Grade Materials
Unless you’re flipping in a class A neighborhood (unlikely), it’s perfectly acceptable to use building-grade materials to renovate your flip. Opt for affordable alternatives to custom materials, such as prefabricated cabinets, lower-grade carpeting or wholesale tile.
Flip On, Investors
At a time when many Americans are struggling to find work, house flippers are in a fortunate position: you can – and should – keep plugging along on the renovations you were planning pre-COVID-19. Keep a keen eye on your budget, be frugal with your renovations and keep making improvements, one nail, one fixture, and one fresh coat of paint at a time. If you follow these simple rules, you won’t find yourself out on the margin – you will find yourself squarely within the profit margin.
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