As mentioned before, we have fixed and flipped 150+ projects. We have learned countless fix and flip lessons through our successes and most importantly our failures. In ‘Lessons Learned After 150 Fix and Flips: Part 1’, I shared my insights on creating a plan, determining your ARV, and more. This is Part 2, including more invaluable lessons that I’ve learned after fixing and flipping over 150 properties.

Be Thorough With Your Scope of Work (SOW)

A thorough and complete SOW is crucial for a successful project. A general contractor wants to know what the project entails. An accurate quote will be provided, so expectations can be set. As the owner, you want a thorough SOW to be able to accurately monitor the progress of your project as well. But most importantly, a complete SOW cuts down on change orders. Change orders can cause friction in the GC/Owner relationship and be incredibly expensive.

Let me provide an example. If you and a GC look at a hall bathroom and you agree it should be updated, what does that mean? Does the tile need to be replaced? Is a new vanity necessary or just a new sink and hardware required? Does the tub need replacing or can it just be re-glazed? If everything is not laid out in writing beforehand, this leads to he said/she said conversations with memories that become foggy after 30 days.  Change orders submitted by the GC because of misunderstandings in the SOW is arguably the number one reason for budget overages on a project.

Don’t Be a Fashionista

Unless your project is a high-end fix and flip, you should “fix” it in a manner that will appeal to the largest swath of buyers.  You want to get your project sold quickly and move on to the next one. Therefore, neutral wall colors, medium tone espresso or walnut colored cabinets and neutral colored floor coverings make sense. I’m not saying that you can’t incorporate some flair into a bathroom tile package or backsplash. But recognize not everyone loves mauve even if you think it should be everywhere. If you want to show some color, do it with accent walls because those can be changed easily and buyers and the agents know it.

Be Over Financed In the Beginning

If you are new to fixing and flipping, do your best to start out with more money than you anticipate needing. There is a lot that can go wrong. Until you have more experience, be sure you have contingencies covered. This can take the form of a bad ARV, a sewer that’s in worse shape than originally thought, a tree with a terminal disease, hidden and undisclosed structural issues and unknown electrical issues just to name a few.

A Good Realtor is Worth Their Weight in Gold

Many of the fix and flip training systems try and steer you away from using realtors. Our experience has shown us over and over, a good realtor who is serious about working with investors is a tremendous asset that pays for itself. The problem with the realtor business is that the barrier to becoming licensed is very low. Many folks are in it part time to do just one or two transactions per year. But a realtor that looks at working with investors as a career keeps on top of shifting neighborhood preferences, buyer trends and preferences, distressed properties and financial institution relationships.

A good investor realtor also knows that an inflated ARV just to get a sale will kill the relationship long term. Sure, there will be misses from time to time but it can’t happen very often. The best of all worlds for us has been to have many relationships with realtors who work regularly with investors. Preferably, have your relationships cover different price points, geographic areas, and property types. Working with an experienced realtor has been a benefit so try it!

Act With Integrity

For us, this goes without saying, but acting with integrity and honesty will pay you back many times over. On one of our projects, we were doing a final cleanup prior to listing. The project manager pulled off some loose plastic sheeting over some insulation in the attic. To our surprise, a methamphetamine smoking pipe fell out. We had the property tested and sure enough, we tested positive just over the minimum threshold for contamination. We were the only ones who knew this and could have easily said nothing and then nothing would have happened.

But we didn’t and ended up remediating the house in a process that took an extra 45 days and $35,000. Our employees and real estate agents involved with the property saw that we did the right thing and we’ve had other property referrals as a result. At the end of the day, you have to like what you see in the mirror.  Acting with integrity can be hard in the short run but will always pay dividends in the long run. It’s a small business and reputations can be killed quickly.

These are only a few of the lessons we’ve learned and we will continue to share in future blogs. We’d love for you to share some of your greatest lessons learned in the comments. Don’t forget to check us out at Fixters.com.

 

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