What comes to mind when you think about a flip?
Reno’s leading to Divorce!!!
Let me break down the myths, because I have done many and learned a LOT!
Can you get rich doing a flip? The short answer is NO. There are many ways to make money, but if you are trying to flip a property because you think it will help take you away to some fancy beach retirement, then let me tell you… no. First off, it’s too competitive these days to buy a property at a cheap enough price to make a profit.
Then comes the Taxman! Talk to your accountant; but the first important rule of flipping, all gains are taxed at ordinary income. Often, this comes at a rate close to 40’ish percent; NOT capital gains which is closer to 20’ish percent. There are ways to address this, ie forming a corporation, which you should consider for the purposes of liability, but I will leave this to the lawyers and accountants! The first time flipper is usually not entering this game with an army of attorneys!
Oh, how I hate that very cheap flip! You know, where the a**holes won’t bother putting hardware on their kitchen cabinets, or pick the cheapest possible faucets, ie a 4 inch center set. How about that 99 cent Home Depot tile?
This is just plain stupid. First of all, if you are tearing open a house, your biggest cost is labor. The cost of slightly better finishing, or replacing that moldy subfloor with new plywood, is pennies on the dollar! You might spend $50 more on a faucet, or $200 more on tile for a bathroom, but the custom finish can help you win a buyer that will go the extra mile to close. So, why not?????
All flippers and potential flippers, here is your most valuable lesson of the day….
The hardest part about flipping is obtaining that distressed property. Once you do, look to make it the shining star of the neighborhood. You should be breaking records on price per sqft, or else you are wasting a great opportunity!
Let me say this again, for emphasis:
You should be breaking records on price per sqft, or else you are just wasting a great opportunity! Get out of my way and let me flip it for you!
DO NOT SAVE YOUR WAY TO PROFIT!
You simply… WILL NOT profit!
Do good quality work!!!
Besides, it’s good KARMA!
Reno’s Leading to Divorce?
If you cannot handle stress, this business is not for the faint of heart. Pull up your socks and get ready for the ride. Because those, “OH Sh*t” moments that lead you to commercial break really do happen in real life. Things that have happened to me….
- Cabinets, OMG, we measured the height of the ceiling wrong, now we have to re-order. Did I mention they don’t take returns and it’s a 2-week wait?
- Garage doors in the whole neighborhood are a standard size, easy to order, but for some reason the builder, 55 years ago decided to make this home’s garage a custom size? Oh, and did I mention, the garage door company just had their first of July sale and have a 6 week backlog?
- Four dishwasher’s delivered in inoperable condition. FOUR??!!
- Oh, those beautiful hardwood floors that needed refinishing. You found a guy willing to do them, even though there is a 2-month waitlist for everyone else in town… and then he died? Yes, he actually, passed away, rest his soul.
Yes, those crisis moments that take you to commercial break, actually happen, in real life. And BTW, all of the above happened with the same house!
So WHY? Why do you flip a house? Why do I do it?
- You need something to do with your extra time that is not another full time job. The other way to look at it is you have nothing better to do with your time!
- You have a VERY strong marriage. Yes, my husband has looked at me like I am totally nuts. But he loves me anyways.
- You love agonizing endlessly over designer tile and paint colors.
Oh there is a whole host of reasons to flip a house. But the reason I do it is:
When you find that terrible home, that has been discarded, and wasted and doomed. When you don’t even feel like walking through it, and half the time you don’t. But then you start the transformation. And day, by day, you feel like you are making a difference. And one day, it is done.
You made it to the other side… You list it for sale, you get multiple offers, above asking, and it’s not the price you focus on! It’s the letters that come with those offers. When people write to you about how they envision their thanksgiving dinners in that beautiful dining room with the gorgeous chandelier (you fought with your husband over and drove 50 miles to buy), or taking prom pictures on the brand new stairway you created, of their now two year olds getting ready to go to prom. When you feel like you want to move in and raise your kids there…
But the real kicker, when your mom and dad say…. Good job!
That’s why I do it!