As a Home Staging Company we work with a number of different investors who regularly flip properties. I started out flipping properties more than 20 years ago and am very familiar with the whole process. We have seen the Winnipeg Real Estate market come full circle. The buyers’ market of the late 90’s and early 2000’s, the hot seller’s market of the next 10 – 12 years and finally, back into the current Buyer’s market we are experiencing. Over the years we have learned some key tips that we share with our investors.
Most investors know you make your money when you buy, not when you sell. You have to buy the property at the right price in order to do the improvements required for property, in that particular neighborhood for a profitable sale. You also must allow for all costs associated such as land transfer fees, legal, mortgage fees & interest, taxes, insurance, utilities, Realtor fees, interest on any lines of credit for improvements, exterior maintenance such as shoveling snow or cutting grass. Equally important is taking into account the average days on the market for a home to sell in your location at your target price range and factor these costs into your carrying expenses! We have seen a number of people invest in higher end homes that are taking 120 days on the market or more to sell. These costs must be factored into your expenses. You may be fortunate and have a project sell faster – but I always go by the average scenario and add a bit more for worst case. At best I make more money than I thought possible – at worst – I’ve budgeted for it and I’m covered! Reno budget is the final factor – determine your budget based on the other homes recently sold in the neighborhood. Then stick to your reno budget!
It’s key to remember how much competition is out there now in the form of new builds. Trying to push of an older property beyond a “reasonable” asking price is very risky. Particularly when those same buyers can drive 5 minutes away and see brand new builds in the same price range! Your older home may be cosmetically updated but may have a dated furnace, or shingles or other mechanicals that are in good shape and do not warrant immediate replacement but that eventual replacement factors into the buyers decision. They can purchase a new home for the same price (with a warranty) and all new mechanicals or your project with no warranty and possible replacement costs in a few years. When pricing your home ensure it is priced appropriately for your location and its competition.
Ensure the workmanship is excellent quality! There is nothing worse than walking into a flip project that has been sitting on the market for months with no prospects. Quite often we will be called to stage in a last ditch effort to sell. Staging does not hide poor quality renovations! The $5,000 or $10,000 you saved in labour costs may well be a small amount compared to how much you have to drop your asking price when it won’t sell! If buyer’s have to come in and rip out what you did and re-do it, they are taking those costs right off the asking price! I’ve even seen investors buy another investors poorly done flip and re-do the work and flip it properly themselves! Fix things that need to be fixed – have invoices and warranties to show the buyers. They need to know they are protected and the work was done properly by someone who knew what they were doing!
Finishing details are everyone’s nightmare. They always seem to take 2-3 times longer than originally planned! However, your finishing details are critical in the final presentation of the property! If casing and baseboards are not properly cut and fitted, if the paint below can be seen through the quick coat someone slapped on, if your tiles are uneven or broken, carpeting cut too short and underlay can be seen by the baseboard, windows are fogged or rotting and need replacement – all these things factor in the presentation of the property! We all know Realtors will tell buyer’s if they feel it was a good job or not – and if it was a “bad flip” with poor quality work that you can clearly see – “what can’t you see that you will have to fix?”. Not the impression you want to give buyers for a fast sale when you want the best price possible!
Planning successful floor plans are critical to showing a property well! If walls are to be removed for an open concept – ensure they are done properly and you have the required supports in place to ensure structural integrity! I’ve seen homes that have just had the painting completed and already they are showing stress cracks where a support wall was removed without the proper support put in place! Buyers will see this too and with the amount of inventory you have for competition now – chances are good you will not get anywhere close to top dollar if you cut corners structurally. Another common mistake we see is removing a bedroom to install a main floor laundry or even a second bathroom. Most buyers look for homes based on the number of bedrooms they have. Removing bedrooms will always remove potentials buyers from the prospects. Look at alternate options – maybe a closet that can be converted into a 2 piece bath that allows you to keep that 3rd bedroom! If the floor plans do not allow for a main floor bath, you can easily have a second bathroom in the lower level that will still qualify as a second bathroom. A bedroom may be better off remaining upstairs as bedrooms have strict criteria and a lower bedroom may not actually qualify as a “bedroom”. Furthermore, if appealing to a younger family, most parents want their younger children on the same level as the parents and not on a different level of the home.
Floor plans that add islands or counter seating peninsulas must take into account space planning! In most cases a sit down eating area is located closely to the island or peninsula. First you must ensure you allow adequate space for counter seating and space to walk behind. You must also allow proper space for seating at a kitchen table and allowance for buyers to access kitchen/dining chairs to sit down without tripping on the bar stools at your counter seating! This is one of the most common errors in floor plans. Sometimes lighting is left hanging in the middle of a walkway where buyers can hit their heads. Your light fixture should be centered over your island/peninsula and over your table. If necessary move the lighting to allow for seating at both areas comfortably with a clear walkway in between that if free of hazards from above.
Lighting is one of those low cost and high impact items! There are some fabulous light fixtures that can really dress up a small space and really give it some character! Use light fixtures to your benefit but ensure they are installed correctly and at the correct height. You can also add great value with new faucets or some nice tile! Use walls tiles on walls and floor tiles on floors – if you get a deal on wall tiles and install them on the floor – you just may end up having to rip them out and re-do them if they start cracking when buyers come through!
Choose paint and flooring options that are appropriate for the home’s age, character and are neutral enough to appeal to as many people as possible. Any time you choose a really “trendy” wall or floor color – you run the risk of turning some buyers away. The more people your reno appeals to the faster it will sell. Use neutrals in your materials and allow your Home Stager to bring in that “pop” of color in furniture and décor. It is always so much easier for the buyers to decorate around neutral tones and see themselves in the space. So pass on the red cupboards or lime green tile.
Home Staging shows them what they can do with the space and just how good it can look! There is simply no comparison between how a vacant home shows and one that is fully staged! A professionally stage home always makes an impact on the buyer! Usually long before the buyer ever came to the property, the photographs of the staged property online created enough excitement for the buyer to short list your property as one they wished to see. We offer the promise in the online photographs, and then really excite them when they see the property in person! Furniture scale, style and placement is key to showing off a space to its full potential. We color coordinate our complete room designs to accent the materials selections you have made. The more neutral – the more options we have to work with. If staging budget is a consideration, we often only stage the main areas and the master bedroom. Unless you have a very small second bedroom and need to showcase furniture placement in this space, we rarely stage secondary bedrooms. We are quite capable of doing so but in most cases it is simply not necessary! If they haven’t fallen in love with the house by the time they reach the secondary bedrooms – that room will rarely make the difference between a sale or not. Besides, we can better utilize the same budget dollars to really maximize the “wow factor” when they see the main areas. This will always have more impact and go much further to convincing them to make that offer.
There are many details to successfully flipping a property. It is very much a tested and tried formula of success. If you stray from the formula you increase your risk and potential returns. If you stick with the proven formula, you can have a tremendous amount of fun and make a very good living at the same time! Enjoy and have fun!