As soon you show interest in real estate investing, you’ll be introduced to the strategy of rehabbing and flipping houses. It’s such a powerful strategy that many investors start this way. It doesn’t take long to learn the basics such as buying distressed houses for about 70% of the after repaired value (ARV). There’s plenty of general information out there.
Here, I’m sharing details about how to rehab or flip a house with the WOW factors that insiders use to create a pipeline full of houses that reliably deliver high profits. Beginners use these techniques to building your first pipeline. Experienced flippers create WOW to consistently deliver big profits from the pipeline. Even if you only flip one or two houses a year, these are secrets for maximizing your efforts.
Getting to WOW is About the Dollars
You’re in it for the dollars so watch the dollars from beginning to end. It begins by fully understanding the ARV. Only when you know the after repaired value can you determine how much to offer for the house and how much can be invested in rehabbing. If you know the neighborhood and have plenty of experience, you can accurately estimate the ARV yourself. But most investors benefit from help.
Wholesaler leads come with some information because he or she must know the basics of how to rehab or flip a house. The information is biased but they will have researched the property and you can use it as a starting point. Not the final answer.
Another valuable piece of information often available is the comparative market analysis (CMA). When it comes from a listing agent it won’t anticipate the improvements you will make. But it will be at the high end of the before repairs value. You’re better off with your own agent estimating the ARV.
Another technique is the broker price opinion (BPO). This is similar to the CMA but the broker is independent from the transaction. Since the broker won’t earn a commission, you have to pay a nominal fee. BPOs are either an exterior or interior assessment. You want an interior BPO (which includes the exterior). Brokers doing BPOs are among the most experienced in the field. His or her opinion of the ARV should be one of the most trusted conclusions you receive.
A last resort can be a professional before and after appraisal. This is probably your most expensive option. You want both the “as-is” and “after-repaired” values. Ultimately, you need to take all of these into account and arrive at your own proforma conclusion. A final step for first time rehabbers is sharing your conclusion and the supporting numbers with a mentor.
How to Rehab or Flip a House Means Spot-on Repair Estimating
After the purchase cost, the rehab costs are your next largest expense. How to rehab or flip a house includes a reliable estimating process to determine the Maximum Allowable Offer (MAO) for the house. Develop a cheat sheet specific to your investing circumstances. Use this only as an example.
- $325 per dumpster for demolished materials.
- $215 per window replacement.
- $200 for every 100 square feet of replaced roof (more if old roofs need to be ripped off).
- $200 per 100 square feet of siding.
- $2.25 per linear foot of gutter.
- $450 per exterior door (includes new locks and storm door).
- $6.65 per square foot of ceramic tile.
- $2.00 per square foot of refinished hardwood floor or $5.25 per new square foot.
- $3,000 for 3 new kitchen cabinets.
- $40 per square foot of granite kitchen counter (includes backsplash).
- $2,600 for stainless steel stove, dishwasher, microwave, and fridge.
You’ll almost certainly have unique requirements such as replacing a garage door or rebuilding a porch to improve curb appeal. It’s a good rule of thumb to add at least 10% to your estimate to avoid cost overruns. You’ll be making this calculation frequently because rehabbers typically have 12 offers rejected for every 1 accepted.
Features that POP for Buyers
Having your costs under control is critically important in how to rehab and flip a house. Adding few finishing touches takes the WOW factor over the top to entice multiple high offers from retail buyers. Include features appealing to mom, dad, and even the kids to out shine what others offer in the neighborhood. You’ll have everything covered from top to bottom - from re-finished hardwood floors to new light fixtures on the ceiling. Here are some finishing WOW factors:
- Matching Stainless Steel Appliances give mom her dream kitchen. Study after study shows quality kitchens to be money well spent for adding the biggest WOW factor.
- Feature a Free 46” flat screen TV on the wall with a small sign reading, “With an accepted offer, you get this free TV.” The cost is only $320 but is a WOW factor you won’t find anywhere else.
- A Free Home Warranty adds a great deal of comfort and confidence in the buyer's mind. The $300-$375 cost is a huge selling feature.
- 100% Ready means vacuumed, cleaned, spotless, and move in ready. Bring in a professional house cleaning company to bring it up to spec. The perfect-condition home makes an amazing first impression.
- Mats/Sign: Begin the impression your homes are “first-class” with quality doormats and a sign reading, “Please take off your shoes.”
What you need to do now is TAKE ACTION!
By Wendy Patton
For more than 30 years, I've used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It's because of that fact and my personal success that I share the Sandwich Lease Option System with others.
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