By Mike Baird
When I go to Mike with a property that I want to flip, we have to take a good, hard look at what kind of rehab the property needs and whether or not it’s going to be a reasonable and profitable investment. Whenever I can get inside and take a look, I get an inspection and as much information as I can from my contractors on what it will cost. That’s not always possible, though. Sometimes we have to make the decision to get the funding and move on a flip house sight unseen.
While Mike’s devoted his career to finding creative ways to build wealth and find funding for real estate investing opportunities, he and I both know on these projects that the sky is most definitely not the limit for my rehab budgets. If I go over budget, we lose part of our profit margin and could even lose money on the deal. That’s why we’ve worked hard over the years to figure out where I can save the most money on my flips to help Mike out as he gets funding and to help us both out in the end when we collect our profits.
One of the biggest money savers I’ve found is savvy supply shopping. I’m not talking about going cheap out on materials, but I am talking about finding the best deals by knowing a few insider tricks.
Buy Quality Paint…from the “Oops!” Section
First of all, always invest in high-quality paint. Cheaper paints require a lot of coats, which means wasted time and the need to buy a lot more paint. Second, when you go to the home improvement or hardware store (wherever you buy your paint), check out the section where they sell their mis-colored paint. These “oops!” batches didn’t quite meet someone else’s color specifications, but they’re still high-quality paints. And, more often than not, you can find enough paint to cover a bathroom, kitchen, or bedroom in an attractive color for a fraction of the cost.
Buy in Bulk
You’re going to have to replace a lot of appliances in your flip houses, so you might as well start stocking up on attractive, quality dishwashers, refrigerators, hoods, ranges, etc. You can find really good discount prices on these when you buy them in bulk, so you can save time and money by having your own back stock of appliances.
That said, if you’re going to go that route, you’re going to need to have a place to store those appliances, and you’ll need to figure the cost of your storage space into your budget for your business. You might find that you actually save enough when you buy in bulk to counter the cost of storing your appliances, but that’s going to depend a lot on where you live and the storage rental rates there.
Shop Around for Bargains
Now, you might think that you have to get your tile, countertops, and cabinets from a home remodeling or interior design store. Costco and Home Depot both sell tile and other materials at much lower costs than a lot of other stores, and you can usually get a pretty high-quality product when you choose these bargain options, too. So don’t be afraid to shop around for the best price on quality tile, last year’s cabinet designs, and/or countertops.
The more you save on supplies as you rehab your flip houses, the more you’ll increase your margin at the end of the day…if you don’t go too cheap. Remember, don’t sacrifice quality for price unless you want to sacrifice the market value of your flips, too. It’s a narrow line to balance, but once you get the hang of it, you’ll find more and more success in your real estate investing endeavors.