Buying a home, fixing it up, and reselling it down the road is a great way to increase the value of a home and make income! It is important to note that there are a lot of risks involved in house flipping, including losing money instead of making a profit, and experiencing a large amount of stress due to financial obstacles and strict deadlines. Before purchasing a property that you intend to flip, make sure to consider the follow advice to avoid a house “flop”.
Plan, Plan, Plan!
Before purchasing a home to flip, it is imperative to create a detailed budget with how much you are planning to buy the home for, how much money you are going to put into it (expenses), and how much you want to sell it for. Putting extra money aside for a contingency fund is always a great idea as unexpected costs and issues can arise when renovating. This budget will give you a great idea about how much income you could earn on a property. Additionally, it is important to understand local zoning laws and permit requirements before buying the property to ensure you can properly carry out renovations in the amount of time that you budgeted for.
The Canada Revenue agency has made recent changes to taxation regarding house flipping, be sure to speak to an accountant so you fully understand any tax implications associated with flipping a house.
Hire a Home Inspector
Conducting a home inspection before buying any property is an invaluable investment which will give an unbiased, objective assessment of the property. Home inspectors will walk their clients through the interior and exterior of the property and will visually assess all of the major systems. They will take their time to explain what they are specifically looking for and what they find along the way. Items that are typically inspected are plumbing, electrical, grading, roofing, siding, windows, doors, HVAC systems, the foundation, structural components and much more. The inspector will discuss the severity of potential issues and share their objective recommendations about the property.
Flipping is an Investment
When flipping a home, it is important to make cosmetic changes that will appeal to a wide audience, including paint colours, cabinetry and countertops. Try not to make bold or personalized choices that are on your personal wish list – just because you love a specific trend or colour does not mean that potential buyers will! Neutralized choices will appeal to more home buyers and lead to a lower number of days of the market. While cosmetics are important, it is also important not to take short cuts on the items you don’t see, such has electrical/ mechanical upgrades, structural issues, insulation. Use good quality products and professional help where needed. The quality of the workmanship in all aspects will be evident in the finished product and will go a long way to determining the sale price of the home.