Just over four years ago, I was introduced to real estate investing and my life has never been the same since. I am now involved in a number of different investing strategies in different provinces across Canada. I don’t generally do house flips much, but an opportunity presented itself and I thought I might as well push myself outside of my comfort zone and I embraced the challenge. Last month was both chaotic and crazy as I was working on this project for the full month.
Here are the 5 biggest lessons that I learned:
- Doing a renovation is not as magical and easy as it looks on TV. I love to watch those fix and flip shows where the buyers come in to a massive disaster. The designers enter and with a great deal of drama, thirty minutes later… voila the place looks perfect, it’s gorgeous and everyone’s happy. Well I’m here to tell you that it is definitely not that easy or magical. There were many aspects of the renovation that did not go the way I expected. A lot of surprises came my way, but overall, I was able to deal with them and now the house is sold!
- Focus only on cosmetic improvements that add value to what people can see. It is not a good idea to invest money in plumbing, wiring and other elements, which are not visible to the end buyer. If a property you are considering flipping has lots of issues that require fixing, even if they are not visible, it may not be a good investment. The purpose of cosmetic improvements is to increase the value of the property and make it more exciting to prospective buyers. That is why in this renovation the focus was repainting the entire house, redoing the flooring throughout and landscaping to enhance the curb-appeal. These improvements were the most cost effective with the most significant visible impact.
- Know your expertise and your limitations. Knowing that I have limited knowledge with the construction element of the renovation, I worked on this project with a partner who has a background in construction. I deferred to her on all things construction and focused on my own expertise, this being the financial aspects, including budget, legalities, contracts and marketing. Of course the décor was also one of my responsibilities, which is definitely one of my strong points. In addition, we hired outside contractors to take care of specific project elements.
- Only hire contractors who can work on the project full-time. We had some “great” connections, however some of them had full-time jobs and were prepared to work on our renovation in the evenings and weekends only. While this was really kind of them, this was a big mistake as we were on a deadline and it negatively impacted the timeline. We should have found strong contractors who were available full-time to get the renovation done as quickly as possible!
- Have a buffer in your budget. Make sure that you have budgeted not only for the costs associated with the renovation itself like materials and labour, but also for the costs required to hold the property. While you are renovating, you are not receiving rent so you will be absorbing the costs for the mortgage, insurance, security system, water, hydro etc. When deciding to renovate, you have to calculate and make decisions based on how much time it will take to complete the project, as “time is money” in this instance.
I bet you’re wondering how this deal ended. Let me answer with the word “cha ching!” It was definitely worth all the effort and I learned so much in the process, both what to do and what to avoid.
If you’re interested in doing a fix and flip, make sure you do all the research required before starting out and make sure you have someone you can reach out to in case you run into the unexpected glitches! Best of luck!