HGTV Star Egypt Sherrod Explains What All First-Time Home Flippers Should Know
Flipping a home for the first time is a lot to navigate, to say the least. One might say it's the ultimate DIY project, as it has a ton of moving parts and things that can potentially go wrong. Aceable says some of the top mistakes first-time home flippers make are over-improving the property, forgoing an inspection, and neglecting the backyard. Failing to conduct an inspection on a property means the buyer will have to deal with any issues later, costing them a ton of money, so it's your job as a home flipper to make sure everything is settled before the sale.
There are several other mistakes first-time flippers can make, but thankfully, Egypt Sherrod, from HGTV's, "Property Virgins," knows just how to avoid them. As a home-flipping veteran, Sherrod has all the inside tips and tricks to make your first-time flip run smoothly. Without further ado, let's take a look at what she has to say.
Do your research
Sherrod says one of the most crucial steps in flipping a home is conducting extensive research before getting started, she tells Cheddar News. If you're really unsure how to go about the flipping process, Sherrod highly recommends getting a mentor to assist you through it. Having a successful home-flipping veteran by your side will help relieve some of the stress, should the moment come when you feel in over your head. Because they've been through the process many times before, they're basically an encyclopedia for all things house-flipping.
New Silver says you should first learn a bit about the industry before you go on the hunt for a mentor. People who have been in the industry for years aren't interested in working with someone totally green, so do yourself a favor and learn the basics of flipping homes. It's going to make your mentor search much more successful. Keep in mind mentors aren't offering their guidance for free, so be prepared to offer them some sort of incentive, such as providing leads on potentially profitable flips.
Know when to flip and when to sell
It's important to know what time of year you're going to see the most success from your flip. According to Cheddar News, Sherrod heavily suggests purchasing the home in the winter, then waiting until spring to sell it. Contractors are looking for work in winter, and homebuyers aren't house-hunting until spring, so you have the entirety of winter to finish renovations. Contractors prefer working with solid, frozen ground, which is why many look for projects in the wintertime, Legal Eagle Contractors explains. The dry air of winter also makes for ideal working conditions, as contractors don't have to deal with heavy rains.
Many buyers start shopping for homes in the spring because families are hoping to move and get things situated before the school year begins, says Rocket Mortgage. Plus, shopping in the springtime weather is a lot more pleasurable than going out in freezing cold temperatures and snowstorms. Once the housing market begins to flourish in the spring, you'll be ready, and buyers will be too.
Understand the formula
As a first-time home flipper, you may not have considered the importance of the after-rental value (ARV) of your property. Sherrod says a home's ARV determines how much the house is worth, which you need to know before you even begin renovations, per Cheddar News. Knowing this figure helps you determine how much money you should spend on renovations in order to have a significant profit margin. Sherrod says a profit margin of $80,000 is ideal, but it depends on your experience and how much your time is worth.
In order to calculate a home's ARV, real estate investors need to look at comparable properties and renovation costs, says Stessa. After all repair costs have been factored into the equation, it's time to determine the maximum purchase price for the home. Investors use the 70% rule, which states renovation prices should never surpass 70% of the future property value once you've deducted costs for repairs.
Get a strong team behind you
It's no secret flipping homes is a time-consuming and costly project, but Sherrod says many people overlook the significance of having a good team to work alongside you, according to Cheddar News. Even if you're a contractor yourself, you can't expect to tackle a project like this on your own. As you scout for members of your team, Sherrod says to look for affordable pricing for high-quality services. This is where research comes into play; when searching for team members, really pay attention to prices and experience to ensure a successful flip.
Hiring a plumber or electrician who lacks experience (or isn't highly rated) is going to end up costing you in the long run. The key to flipping a home is doing it right the first time so you aren't out more money than you initially calculated. It may take some time to find the right people, but it will be worth it in the end (like we said, flipping homes isn't quick or easy).
Direct your attention to the kitchen
When flipping a home for the first time, pay attention to the kitchen. Sherrod states it's the most important room in a home, so you shouldn't be skimping out on any details during the remodel, per Cheddar News. As much as you may think house guests are going to congregate in your living room, we all know everyone ends up in the kitchen. Not only is the kitchen the most important renovation, but it's also the most expensive. The average cost of a home remodel is about $26,000, but can reach nearly $38,500, depending on your kitchen footprint, Angi states.
Determining your kitchen footprint involves examining the conditions of the kitchen. Do the floors need updating? How old are the appliances? Does the layout make sense? If the kitchen has a small footprint, fortunately, your costs to renovate it will be on the lower side; however, if your kitchen needs a lot of work, you could be spending closer to $38,500.