I’m interested in flipping homes out of state because everything in my area is out of my price range (I live in the bay area).
For anyone with experience hiring contractors for flips: are there any things I should specifically ask the contractor about? Can I use the contractor to scope out the property because I won’t be there to see it myself? Anything else I should look out for/tips?
Thanks!
Check their availability and ask for time frame to complete job. When flipping, time is an important factor. Also make sure they understand its for a flip as you will want the end product to appeal to as many people as possible, so staying in the neutral colors and clean design is important.
You may send the contractor out to walk through the property, but do ask him for photos per room, and also a design plan with materials to be used. A broken down estimate is a must.
Agree with @rlremodeling that time is a critical consideration. Early in the interview process, it may also be worth asking about whether they have additional commitments that may overlap with your project; I’d also think you’d want to go with a contractor who can show that they are very meticulous when it comes to scheduling and hitting their proposed timeline.
Gh95.
Both comments are spot on. What I have done with several flip Clients is, cover the cost of the renovation with an agreement[contract ] that we will receive full compensation, with a %./it is time frame sensitive/ and monthly payments would apply,until the house sells.
This way the clients only out of pocket the cost of buying the home, we Cover 100% or share the expense of fixing it up, Renovation work is complete, and small monthly payments are made up till the home is sold.
Then both parties share in the proffits at close of escrow. You must both be in total agreement to the least amount you will sale for.! **that’s imperative.
This also creates, a desire to provide the very best finished products in a timely fashion!, As we both benefit in a huge way, when the house is ready to show.
You will want to do comps in your area, so that you don’t overspend. And stick to a budget. Visit homes in your area that are up for sale, and take from them what potential buyers are interested in.
Also this will provide you a good base as to what is on the market in your area.and to what extent they went to for any renovation, prior to the sale, if any… We are willing to share the cost and risk, since we strive to provide an outstanding finished product, we both benefit from.
I would like to add if your able to Appeal to a cash buyer, they you can afford to spend a little more and up sale the area, But to do this you must be able to afford to do so.
There are many potential buyers who may not qualify for the standard loans provided today, If you own the house you can be the banker, set your own terms, Sale with a lease purchase option, for example, the down payment helps cover renovation costs, the house increases in value , a year or 2 later you have them take out a fixed interest loan. The Tennant now has a payment record, which will make it easier for him to qualify. [You would set this up through a title company] they collect the payments then distribute funds per your instruction, the cost is minimal for this service.
Should it not work as planned you can take the house back and Offer it up for sale again.[Again make the terms very clear and simple]
Make sure you can afford to get in the game, it can prove to be very profitable.
Perhaps you can approach one of your local Solid contractors and suggest a partnership?
Besure you check out their history, past performance is a pretty good example of what they will do in the future.
We have entered into 6 deals similar to this, with in the past 6 years, only because the need was and is still there.
Best Of luck, Feel free to contact me should you have any questions.
James Hood
Cadillac Tile LLC
Cadillac Properties LLc [our rental home inventory]
Thanks for all the detail in this post! It sounds like you’ve done this a few times and have had some great experiences.
Do you think most contractors are open to a deal like this? It sounds kind of like Cost Plus, but a bit different. When the home sells do you get a percentage of the sale price, or a set percentage of the work done (cost plus) minus the monthly payments made up to that point?
Hello Zack,
James Hood Cadillac Tile/Cadillac Properties llc.
I cant answer for the rest of the group. My business is very solid,[We collect only when the job is finished!,] just read the reviews. So we financially are able to complete entire home renovations anywhere from 25K up to 100K.
Get in with a Financially strong contractor and the deal should be a no brainer.
To address your questions directly.
After you have checked the items I mentioned . comps,? whats been done to them?How long were they on the market? sale price ? Terms if any?
So you both sit down review the extent of the renovation, what the yield will be when it’s finished, Obviously the cost!
Yes I do share in the % of the homes sale which is predetermined prior to the home hitting the MLS.
Would we take less? yes, but it means that everyone including the agent shares in the price reduction.
Work with a Broker, they have more pull when it comes to settling for less commission.
The work is figure just as it would be if they were paying for it up front/ difference is I am providing materials at my cost, and discounts that apply. The benefit is the client is not out of pocket for any of the materials or labor[just acquiring the home] Everything is set up on a timeline, with penalties for us if we don’t meet them. The goal is get the house on the market! normal time frame for a full house 1500 to 2500 sq ft is 30 days larger homes 45+. Its aggressive but doable.
Payment schedule, this is set up 30 days after the home is on the market, and a small payment, per our agreement at the time we entered in to the contract, usually, if its 50K the payment is $500.
This payment is deducted from the original 50 K, and a running ledger keep track, when the house goes into escrow we are a lien holder, for the work less any payments.
Again a quality Escrow company can assist with the paperwork.[they are like a traffic cop they keep things running smooth]
Basically your joining forces to acquire a property / Make it look fantastic, sell it and make a profit. Sure beats watching the DIY shows and doing yourself,meanwhile working your full time job+ covering the added expense or depletion of your savings. Not to say you cant help out and have a hand in things. On all our homes we call in an inspection of the property , Sometimes before we start renovating!, then we be sure to address any issues also check for code violations. and correct them as well, When finished we have the house inspected again , this copy can be provided to the potential buyer,[piece of mind] also you will want to select and buy a home warranty, this way you can get the one you want to pay for, and not one your under pressure to get because the sale is pending , right? They can run 300 to 700 on average, I am sure you installed new appliances , so they have coverage.
I will share a little secret,We also expect the agent to perform with in a set time frame, Home sales in 30 days or less full commission, no problem 60 days % is reduced 90+ days its turned over to a new agent, You have to write it into your contract, again an Agent/Broker is your best bet.You interview them while the project under way. Best of luck, Managed properly and the right team it can prove to be a money maker for all.But you have to buy the home right and well below market.
P.S. the second one only gets easier!
James Hood
Cadillac Tile LLc
Cadillac Properties LLc
