Flipping houses is exciting and it can lead to great profits. A big factor in how much money you will make is the time it takes to complete the flip. The longer you have to hold the house while you are completing renovations or trying to sell it, the less money you will make as you are paying the ongoing cost of the mortgage.
So, the natural question then becomes … How long does it take to flip a house?
Well, let’s break down the entire process of buying, fixing, and selling a property. In this article, we’ll also go over the time frame you can expect for each step along the way.
Fix and Flip Timeline
-Buying a Property – 5-14 days
-Fixing and Rehabbing the Home – 2-4 months
-Marketing and Selling the Home – 2-6 months
As you can see, the most significant time investment will be finding a buyer for your flipped property. While there are methods to cut it down, you need to be prepared for this. This period can be unnerving for new fix-and-flippers. Overall, on average, a fix and flip should take about six months if you know what to expect and have a plan in place. Let’s dive further into each step.
Buying the Home – Finding a Seller and Getting a Fix and Flip Mortgage
Most people secure their fix and flip properties with a special fix and flip loan like the ones offered by Brass Financial Group. Our “fix and flip” mortgages are designed for motivated investors like yourself. Rather than waiting for weeks or months for a loan to come through, you can get approved quickly and efficiently. This way, you can secure the property you found and get started on your renovation sooner.
While a mortgage is necessary, finding the right property is also a crucial part of this step. There are a couple of variables to keep in mind. First, you want to find a motivated seller. Next, you need to make sure that you can turn a profit without sinking too much money into the property (the 70-percent rule). Here’s a quick overview of how to manage both of these variables.
In most cases, you don’t want to buy a property from someone trying to make money from the sale. Instead, you want to find those who need to get rid of the home fast. The more motivated the owner is, the better deal you can get. There are a few reasons why someone wants to sell quickly, including:
-Tax Liens – The bank is going to repossess the home.
-Inheritance – A family member died, and his or her heir doesn’t know what to do with the house.
-Downsizing – Could be someone who has to move out of town quickly, or retirees who can’t afford payments.
Fortunately, you can check liens and repossessions within your market to find some of these motivated sellers. Also, keep in mind that you’re assisting these sellers. Yes, you’re getting a better deal, but typically these individuals will assume massive amounts of debt or potential bankruptcy if they can’t sell fast.
The 70-Percent Rule
To ensure that you will make money on a flip, you need to calculate the maximum you can pay. Since the whole point is to fix an older or run-down house, you have to consider the cost of renovation and upgrades. The 70-percent rule says that you shouldn’t pay more than 70-percent of the selling price (what you’ll sell it for after the flip), minus any repairs.
For example, let’s say that you found a house in a neighborhood where the median selling price is $200,00. Seventy percent of that is $140,000, and you know that you’ll have to spend around $20,000 in repairs and remodels. That means you shouldn’t pay more than $120,000 for the property.
While this isn’t a hard and fast rule, it does provide an excellent baseline. You might be able to sell the property for more than $200K, or you might have to eat into your profits a little. Overall, consider how much money you need to make on the deal, and that will tell you how much your mortgage loan should be.
Fixing and Rehabbing the Home
Ideally, you’ll be able to walk through the property before buying it so that you can spot any potential fixes and necessary renovations. In some cases, however, you might have to buy a home as-is to ensure that you get the best deal. In those instances, as long as you purchased it below the 70-percent threshold, you shouldn’t have to worry.
The first thing to do is to get professionals to come in and provide an estimate for the cost and duration of each upgrade. When getting these estimates, consider the following variables:
-Not all renovations will earn dividends. Try to avoid massive remodels unless you know that you can flip the house for a lot more money afterward.
-Small upgrades can have a substantial impact. Even something as little as painting the exterior and replacing some of the windows can earn you a profit.
-Time is usually more of a deciding factor than cost. If one remodel will take four months to complete, but another will take three, you’ll want the former option if possible.
-Consider how much work you can do yourself. We’ll get into DIY options later, but your labor will be much cheaper than a professional.
Working with a Contractor
Assuming that you want to fix and flip houses for the long-term (instead of a single investment), it’s best to build a relationship with a contractor you can trust. Overall, you want to work with the same team each time since that will expedite much of the flipping process. Also, having these relationships can potentially pay off with discounted rates and priority work.
As long as everyone involved in the flip gets a good deal, it should run relatively smoothly.
DIY Fixes – What are Your Options?
If you’re not a contractor or electrician, then you’ll be limited to simple fixes like painting and cleaning. In many cases, you can save hundreds of dollars by doing these things yourself. We never recommend handling demolition or complicated interior systems (i.e., plumbing) without proper training.
Again, if you plan on doing fix and flips for the long-term, it’s worth it to become certified in a specific field. This way, you can take on more work yourself and pocket the difference in each deal. That being said, your time is still valuable, so don’t be afraid to delegate jobs and responsibilities. Yes, it will cut into your profit margin, but it will also make the work go faster and smoother.
Marketing and Selling the Home
Once the property is move-in ready, you need to promote it to various buyers. While it may be tempting to sell it yourself, it’s often a lot better to work with a certified realtor. Unless you know the ins and outs of selling a home already, a real estate agent will help you close the deal a lot faster.
Again, this process will eat into the profits somewhat, but it’s much better for the long-term. The best way to consider it is that you can’t get rich from one flip – you have to do these deals consistently to start to earn some real money.
When working with an agent, he or she will tell you the materials that can help the home sell faster. Typically, these will include:
-High-Resolution Photos – These can be used for flyers, pamphlets, and a virtual tour.
-Decor – While you don’t want to go overboard on furniture and accessories, having a few can make the space feel more accommodating.
-Signs and Flyers – You’ll need to host open houses and walk-throughs for potential buyers, so you’ll have to promote it physically and digitally.
Finding the Right Buyer
Just as you want to find a motivated seller, you also want to take the time to find the right buyer. However, since you know how much you need to sell the home to make a profit, that will be your baseline. In most cases, it’s better to take a guaranteed offer now than to wait and hope for a better one later. Not only that, but if you’re trying to use the money to purchase another home, you can’t afford to wait.
When marketing the property, consider the ideal buyer beforehand. Is the home in a family-friendly neighborhood? Is it more beautiful than the houses around it, or average for the area? Does it have any unique features such as a pool, patio, or furnished garage?
For example, if the home is ideal for a family of four, you want to reflect that in your marketing materials. Showcase the excellent schools nearby, as well as playgrounds, parks, and the neighborhood safety rating. If there are multiple dog owners on the block, you can appeal to families with pets. Get creative and use different elements to your advantage.
How Much Time to Close the Deal?
While you may be ready to sell, the buying process can be lengthy. Inspections, credit checks, and waiting for escrow can all add up. In most cases, you can expect to wait at least three months for everything to finalize. Depending on the credit rating of the buyer and the lender he or she chooses, it could take much longer.
Here is where having a realtor on your side can come in handy. An agent can do all of the negotiating and paperwork for you. Selling a home can be a full-time job, so if you don’t have the time and resources to focus on it, then you need a professional to help. Also, consider that you could be using this time to find your next fix and flip property.
Tips for Expediting Your Flip
While there are plenty of variables beyond your control, the more you do these deals, the faster you’ll be able to make money. Here are some tried-and-true tactics that can help you avoid rookie mistakes.
Get a Plan Together
No matter what, you want to avoid “winging it” when flipping houses. Before you even start looking for a property, develop a strategy first. Now is when you can meet with realtors and contractors to build those relationships. If you wait until you have a property already (complete with a loan), then you’re only wasting time.
Another thing to put into your plan is hidden costs and expenses. Never assume that you’ll pay a certain price for something – always add extra just in case. If a renovation typically costs $1,000, budget $1,200-$1,500 instead. By buffering your budget, it’s easier to increase your profit margin without having to cut corners.
Work with a High-Quality Team
You’ll need to work with a variety of professionals during your flip. Contractors, realtors, mortgage lenders, inspectors, appraisers, and more. You also need to consider yourself as one of these professionals. If you want to work with the best, you need to be one of the best as well. If you’re always running late, trying to cut costs, or wasting someone’s time, then you’ll have a much harder and longer road ahead of you.
Get a Fast Fix and Flip Mortgage
Financing is usually the biggest hurdle with these deals. A fix and flip mortgage from Brass Financial can help alleviate this problem. Since we work with investors like yourself, we know what to expect, and we can provide excellent rates and terms. We can also help expedite the selling process by working with your potential buyers. Usually, the more lenders involved, the longer it will take.
Search for Buyers While Renovating
Once again, having a plan is going to make your flip run a lot smoother. Overall, you want to avoid waiting until one step is done to move onto the next. Many buyers can look beyond renovations to see the potential of a new property. Don’t assume that the home has to be move-in ready before you show it off. Anything you can do to get the buying process started sooner will save you a lot of headaches later on.
Get Your Prices Right
As we mentioned, you’ll never get rich off a single flip, so don’t try to milk one property for extra money. Yes, it would be nice to get an additional $10,000-$20,000 when closing, but it’s not worth waiting another two or three months. Also, be aware that you might have to lower the price in some cases. It’s not ideal, but you don’t want to be stuck with a home that you can’t sell. Flipping houses only works when you can avoid paying too much interest on a mortgage loan.