By Mike Baird
When clients come to me for real estate coaching, they usually have some idea of what they think house flipping is all about and how to find the perfect flip. They think that it’s better to find a house that doesn’t really need any rehabbing, and they’ll turn down a lot of properties that they think will take too much time and cost too much.
Now, there is definitely such a thing as a lost cause in the house flipping business, but I personally love getting deals on houses that need a lot of rehab work. Why? In this business, you make your money when you buy properties, not when you sell them.
The whole point of a fix-and-flip is to bring it back up to market value without going over your budget. If you can get a good deal and keep your rehab costs low, you can sell a house at market value, even in a slightly down market, at a good profit. If you settle for a mediocre deal and you spend a lot on the rehab, counting on selling above current market values in the area, you’re going to have a bad time.
So, when I look at new houses, or even when I’ve bought a property sight unseen at auction, I always have a rehab checklist to start working on from the first day of rehab. With this checklist, I can go in with a worst-case scenario in my head and make an educated guess about expenses before I make the deal.
Every flip is different, but you can use this checklist for your flips to make sure you’re getting into a good deal and keep your job organized.
- Roof and gutters: $0–$10,000
- Chimney: $15,000
- Landscaping: $500–$2,500
- Paint and trim: $2,000–$5,000
- Exterior doors and garage doors: $500–$3,000
- Curb appeal details and other incidentals: $0–$500
- Drywall: $500–$4,000
- Trim and interior doors: $1,000
- Windows: $2,500–$4,000
- HVAC: $0–$10,000
- Kitchen: $2,500–$8,000
- Bathrooms: $1,000–$8,000
- Electrical wiring and switches: $250–$5,000
- Plumbing: $500–$10,000
- Flooring: $2,000–$5,000
- Interior incidentals: $300–$500
Modifying the Checklist to Fit Different Houses
This checklist gives me a worst-case scenario on most properties, but it’s not perfect for every flip house. For example, this list assumes that the house doesn’t have a pool, which can present a pretty big increase in your rehab budget but can also add thousands of dollars to your after-repair value.
I use this checklist as a basic template when I go into a property, but I’m always modifying it to fit each house I rehab and flip. If a house doesn’t need any plumbing or electrical work, I can save money on those areas. If it doesn’t have a chimney, I obviously won’t have to do anything there, and that makes more room in the budget for unforeseen issues.
If you add up all of the items on this list, you’ll get a range of costs for your rehab. Add that number to the asking price of the property, and you’ll have a good idea of what kind of offer you can make to get a good deal.
Feel free to use this list as a good gauge for your fix-and-flip deals. I use it on all of mine, but, of course, it’s not my only tool or secret to finding great deals on flip houses. For more help, check out a Property Bank seminar for more tips and real estate coaching.