Contrary to popular belief, success in real estate is not just about location. Time is just as important (possibly even more so!) and even though you may have a great deal on the table, timing can occasionally make or break the deal. To flip a house successfully, you have to develop an efficient timetable and stick to it.
The Importance of Timing with Real Estate Investing
A good rule of thumb when it comes to a timeline for flipping a house is about $1,000 per day. For example, a $30,000 repair job should take about 30 days. However, if you get into a larger job, the lower the cost per day should be. A $90,000 job shouldn’t take 90 days.
Between fees, taxes, and paying contractors to provide repairs, fixing up a property that you have can be very costly. Although some of these costs are fixed, carrying costs increase the longer you hold onto the property. However, even that doesn't account for the value of your time; depending on what else you could be doing, extra time spent flipping a house may cost you hundreds of dollars a day in lost earnings.
Timetables are the key to being successful in this industry. The typical fix and flip is a 3 to 6 month process--possibly longer for larger jobs--but by setting clear expectations for each stage of the process, it is possible to cut this time down by quite a lot. The actual repairing of a home is usually the most time consuming part of the process, so it’s best to focus on keeping that time as efficient as possible.
How to Be As Efficient As Possible When Flipping a House
1.) Have Your Contractors Ready
Take your contractors on a tour of the house before you close on it. The contractors can get a sense of what kinds of repairs the house needs and prepare themselves for the work ahead of time. Also, be sure to have them scheduled and ready to get out to the job as soon as you close and take possession. There’s no reason to waste a single day.
2.) Proper Sequencing
Develop a proper sequence ahead of time so that you don’t have to “wait” unnecessarily. Taking a little bit of time before the repair process starts will help eliminate dead time.
3.) Penalties for Late Work
Although we understand that certain situations do arise that can delay a project, setting a mutually agreed upon completion date with your contractor will help keep it on track. Also, it’s a smart move to build in a penalty if they end up taking longer. Of course, if a contractor is very efficient and gets work done before the anticipated completion date, you should reward him or her.
Besides cutting down on the actual repair time, try to sell the home in 8 weeks or less. Meet with your realtor before repairs are finished to list the house early on, and be careful not to ask for an unreasonably high price. The real estate investing industry is one in which timing is a key component, and with proper timetables, it can be one of the best financial decisions of your career.