How organized are you?
In the world of speculative property investment for quick profits (flipping), it goes without saying that the trite adage “time is money” holds absolutely true. This is because the quicker you can get to making your renovations, completing them, and putting your investment property on the market, the quicker you should be able to make a profitable sale on it. So it behooves you to have your plans, tradespeople and marketing strategy for selling your property all in place – before you actually go to the closing on your newly-acquired piece of investment property.
The power of incentives
Create a schedule for all work to be completed and drive your tradespeople with a steady but firm hand. Incentivize the completion date for them by adding in a small bonus to their already-agreed to contract. Or, if they’re on time and materials, build in a bonus for completion of work by a certain date. It will be “extra” money well spent when ultimately flipping investment property.
The all-important window of time
You’re always looking to narrow the amount of time you actually own the property to as short a window as possible. Carrying costs of insurance, taxes, heating, electricity, etc. all add up for every day you own the parcel. So you can’t afford to waste a single day. It’s always a good idea to try to acquire your properties for flipping which allow you ample time frames to make your renovations, and then be able to place the house on the market in one of the two prime real estate selling seasons: Spring (beginning in early March and lasting through mid-June), or Fall (early September to the very end of October).
The time to work your ass off…
Pre-planning is everything. From the date you get a signed contract until you actually close on a house should be the heaviest work-load period for you in any flipping investment property project. If it isn’t, you’re not optimizing your time correctly – and you’ll be eventually holding onto your property, and incurring greater costs in doing so.
No deal is ever a 100% lock to go through – even all cash deals. If there’s a problem with the seller’s title, for example, you may end up waiting a long time for them to clear the defect – or, you may decide (and have the right) to back out of the deal, with any deposit money returned to you.
However, this is a rarity. I like to take the risk of doing all prep work right after signing a contract. This prep work includes purchasing materials ahead of time, prior to actually closing on the property. Many materials, such as custom kitchen cabinets for example, require lead times of a minimum of three to four weeks. You never want to have your contractor or carpenter waiting on materials once they’ve begun their work.
Time to get your crew in…
In addition, you’ll want to start interviewing several sets of tradespeople (if you don’t already have your crew set – see my article on assembling your crew). If you already use a standard set of tradespeople for all your projects, which, of course, you should, get them all in to discuss the project the day you have an executed contract (one which has been signed by you AND the seller)). Discuss the renovations/repairs you want to make to the property. You should have already drafted a set of “work to do” punch lists for each tradesperson – even prior to obtaining a signed contract!
Start creating your “exact” budget
Go over the punch list for each tradesperson with them, get their price, and negotiate a contract with each one. If you’re on time and materials, discuss their guesstimate of the amount of time required to complete the project. As mentioned above, also incentivize it for them so they complete the work even faster than what they predict.
If you’re planning major renovations such as kitchen or bath rehabs, work on developing full kitchen and bath layout plans in this crucial time period. They too will become part of the overall costs your tradespeople will be figuring in, so you must have the full plan already created and ready to go for them - as soon as possible after signing contracts.
Coordination of people - a difficult job
Ultimately, your goal is to hit the ground running after you close on a house. When flipping investment property, one of the hardest jobs you’ll have is trying to coordinate the “tentative” closing date (which will eventually turn into the “actual” close date with your attorney – and then line your first set of needed tradespeople to come in and begin work immediately upon closing. Demo and cleaning work is usually the first job on your punch list – and you or your contractor will also have to coordinate the delivery of a dumpster to the property immediately after the closing.
Sweating the details…
You’ll find the detail work to be more and more voluminous as you move from contract signing to closing dates. Again, just be prepared for it. This will obviously test your organizational skills. It is the toughest, most grueling part of any flipping investment property project. And it will require your greatest organizational skills to pull together those punch lists, materials ordering, negotiating and coordination with all parties involved in the acquisition of the property, as well as the fix-up work to be done.
Honing your skill set
However, if you’ve planned well, you’ll find that with each succeeding project, you’ll define your methodology and hone your organizational skills. And if working with a set crew, you’ll find the benefits of utilizing the same people for repeat business. Getting them to move another job to accommodate your project’s time frame will become easier and easier.
In the long run, you’ll find that, while exhausting, the time period between obtaining executed contracts and actually closing on a property will become some of the most exhilarating time periods when flipping investment property. Next to going to the bank and depositing the proceeds from the sale of your property you worked so hard on, that is.
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