Wow, talk about a long journey! Who knew renovating a house could take SOOOO long!
First and foremost, for all you do-it-yourselfers and wannabe flippers: caution with cash! While Justin and I went into this full well with cash to purchase and cash to renovate, we knew certain things ahead of time (so do all your research!!!!!)
Homes in Lansing, MI have an average list time of 110 days. While that doesn’t stop us from getting onto our realtor to get this house sold (it’s been listed for less than 2 weeks and we are pushing for walk-thru’s), we knew ahead of flipping that we may not see a return on our invested cash for 3-4 month AFTER putting it on the MLS as active.
We took great caution to hit the middle-range of what houses were worth in this area, and we were on the MLS system almost every other day to see what our house was worth and how much money to put into it. (No, I’m not going to post how much money we put into the house for resale purposes.)
“Here’s a tip — if you’re wanting to flip a home as a beginner, the house you flip should be at 50% of what surrounding home prices are. For example, if the houses within a half mile to 1 mile sell for 100,000, your house should be no more than 50,000. Your total investment should be no more than 65%, so $65,000. $65,000-$50,000 = $15,000 leftover for renovations.”
Take in mind, $15,000 doesn’t go a long way. Licensed contractors, unforeseen issues like plumbing, electrical, and simple things like baseboards add up quick! Also remember, if you think you can do it yourself, even drywall can be a tedious task and if done incorrectly or sloppy can deduct thousands off an asking price. Even with experience, looking back at our ‘first’ flip, hindsight is 20/20 and there were a lot of different ways to spend the money in better areas and we could have saved A LOT of time if we knew certain things ahead of time.
While I wouldn’t tell anyone NOT to flip a house, I would highly recommend that you have a lot of money on hand to make sure you aren’t relying on credit. It forces you to be creative with the money, and keeps you out of hot water later!
(P.S. — After renovations, we are at %54 percent total investment. That’s the only thing I’ll say!)