House flipping programs
When people ask if house flipping programs are realistic to what Reel Property Solutions, LLC does, the answer is normally: Not exactly! Usually what house flipping programs show is the renovation. That’s only a tiny fraction of the entire process. Reel Property Solutions, LLC found this link on YouTube from people who do house flipping programs in Austin, Texas: https://www.youtube.com/watch?v=EU0unRN6BdU
This is an outline of points to consider about house flipping programs:
Marketing:
- What methods were used to get their name known? (EX: Billboards, online advertising, word of mouth)
- What was the lead source for this property? (MLS is popular, off market, pocket listing?)
This particular video didn’t showcase how the property was discovered, didn’t showcase the time involved with how to obtain properties, nor showcase the cost of various marketing strategies.
Negotiating price:
- What was the list price? (How far off was the list price to the actual purchase price? For example: Did the homeowner want to sell for $230,000 or was that negotiated? What was the timeline from first seeing the property to getting under contract?)
- Did their financing cause delays? (Did a private money lender- PML- have funds readily available and didn’t require an appraisal for quicker transacting verses an HML who may not get information processed within the timeframe originally indicated?)
- Did their financing strengthen their offer? (Was a larger Earnest Money Deposit- EMD- what helped their offer to be accepted?)
House flipping programs rarely touch on this area. What people do not realize is the amount of time devoted to the negotiation. A seller may be determined to sell for a set amount, but due to the condition of the property, comparable properties, renovation budget, and seller motivation levels, the actual sale price may need to be reconsidered. This can be a long process. A seller may call on January 1, an initial title search completed January 3 (had to wait a day since the government center might be closed for the New Year’s Holiday), the actual tour may happen January 5, the initial offer January 7, the seller thinks about it and has a different price on January 9, the offer is accepted January 11. A contractor may come in January 13 to give a bid but during that time may see something that throws off the plan. Now a new price might be negotiated with the seller. Now it could be January 17 before a new offer is presented to the seller. The seller may need to take time to seriously consider and talk over with legal personnel, family, mortgage company, etc. One week later, January 24 the seller may go back and present a different number which might be accepted on January 28. Since the house flipping programs representative needs to ensure the numbers align and everyone agrees to the purchase price, this might happen January 31. Now one entire month has passed with the property under negotiation and finally ready to be put under contract.
Obtaining financing:
- Bank loan from a Hard Money Lender (HML)?
- Cash?
- Their own funds?
- Other People’s Money?
- How was the rehab, transaction costs, and holding costs financed?
This is another area most house flipping programs either do not focus at all or give a very short synopsis. How much money does the house flipping programs need to present? Who is loaning the remaining portions?
Purchasing the transaction:
- Title company?
- Real estate attorney?
- Another scenario?
This and most other house flipping programs episode didn’t state how this property was represented in a transaction. The reality should be focused on the emails and phone calls back and forth. For example, was the contact person on vacation, therefore the back up person didn’t have a clue about this property? Is this a title company that has been utilized several other times, so the process is smooth?
Holding costs:
- Principle and other monthly payments to the money lender
- Insurance
- Taxes
- Interest
- Utilities: water, sewer, electric, gas
- HOA (if applicable)
- costs
In this episode, the holding costs were not disclosed. This is one of the most overlooked, yet very important aspect of the budget.
Finding the contractors and ONLY hire licensed/insured contractors:
- What if the contractors can’t schedule at the same time?
- What if the lead contractor has a medical issue and unable to work?
- Always have legal documents signed to ensure work will be done on time, on budget, the way intended, payments will be done a certain way, etc.
Again, house flipping programs tend to skip this extremely important topic. Having several contractors in your network is crucial! For example, Reel Property Solutions, LLC works with contractor B who had a serious leg injury that required 2 surgeries. Obviously, after surgeries, contractor B was not able to physically work. Also, always have documents signed stating what work is to be done and a timeframe. Mother Nature may not cooperate such as in this episode of heavy rain which prevented the roof from being shingled. Be flexible with the schedule as well.
Pulling permits:
- Check with Building Safety Office
- Who pulls the permit?
Typically, the contractor should pull the permits since they are the ones actually performing the work. House flipping programs tend to just focus on the contractor at the site and not what all needs to be done before.
Staging:
- Less is more!
- Remember the buyer will not be moving in with the staging as is (unless the buyer chooses to purchases all the staged materials.)
- Staging should be very neutral so the house flipper can use over and over!
In this episode, the cost of most staging items was revealed. Staging should be one of the lowest budgeted costs. Also, important to note is not every room needs to be staged- focus on the main areas and master bed and bathrooms.
Price points/don’t over nor under rehab:
- Focus on the selling features: wet areas! Kitchen and master bathroom will sell a property.
- Open floor plans seem to be desirable.
- Fireplace in this property was a huge focal point and conversation piece.
- Shiplap?
- Paint?
- Part was removed
- Whatever the case, go neutral for the next buyer to have the easy ability to personalize. In this scenario, the fireplace was painted white and can have a different finish later.
- Wood floor was a neutral color
Generally house flipping programs focus most of the show on these above listed points. In this episode’s property, most likely the target audience is a young family looking for a move-in ready home. This property already had the basics, therefore, didn’t need to add onto the property nor would be suitable for high-end finishes. Keep in mind the target audience for the next buyer and how the property is designed.
Landscaping:
- Again, do not over landscape for the type of property.
- Simple bushes and clean up are a great foundation for the next buyer to add in their own touches.
Generally, clean up the weeds and debris will get the landscape looking refreshed from the beginning. If a property is large, such as 1 acre or more, then extensive landscaping perhaps with a retaining wall might be appropriate.
Marketing the sale:
- This episode didn’t show what was done to let the public know this property was for sale:
- FSBO signs?
- Listed with an agent?
- Social media advertising?
- Word of mouth?
- What was the marketing budget?
Another extremely important part of fixing and flipping houses is being able to sell the property! House flipping programs tend to skim over this part. A real estate agent is not required to represent the seller. Perhaps someone in the team has their real estate license and is able to conduct the transaction. But first, how did the property get to that point? This is essential to get the property off the books and move on to the next!
Closing the transaction:
- Same as purchasing the transaction: who represented?
- How long was the property pending?
- Did the appraisal meet the price?
- Was an inspection needed from the buyer?
Closing the transaction can also take more time that initially thought. House flipping programs usually do not divulge how many offers, how long the property was pending, and what was needed to negotiate the selling price. Just like the initial process of negotiating the price example was one full month, so can closing the transaction.
This episode has a lot of entertainment:
- Movie scene with the patio door
- Man on the roof, woman on the ground having a phone call
- Shopping at Hobby Lobby
- All the cat jokes
- Talking about what foods can be made on a griddle stove
Editing with sound effects and moving the sequential order to keep views interested and entertained is also how house flipping programs draw a crowd. In reality, flipping houses is also a lot of fun, however, at the end of the day, it’s all about business. Sometimes people think flipping is all entertainment and get surprised by how much energy it takes to get from start to finish.
How realistic:
- Delayed with rain
- Suspicious crack they thought was a foundation issue
- Team member who did the acquisition for the property
- Renovation costs appeared accurate with the number of projects completed
This episode showed many very realistic points, particularly delayed due to rain. Weather is something that is beyond anyone’s control whether we like it or not! This is also why property insurance is required. What if the rain also had high winds that caused the roof to become damaged? This will eat up the renovation budget and more!
In closing, when working with Reel Property Solutions, LLC, be advised the timeframe, systems, and resources are going to be significantly more in-depth that what is seen on a 30-minute TV show or however long the editor created the YouTube video to be. Fortune Builders is our education of house flipping programs. There are many resources to utilize from online classes to live classes to webinars to coaches who can answer questions to a support team via email to getting to know people in a local network. That is one reason why Reel Property Solutions LLC is an outstanding team to work with! If you want to talk more about house flipping programs or if you have a property to sell,
contact info@reelpropertysolutionsllc.com or 507-218-8788.
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