Q&A With a Local Expert in Real Estate Investing
“I am looking to sell my flipped investment property. What are things to watch out for in the buyer’s home inspection?” – Lisa of Issaquah, WA
Every home is different, and depending on the size of the project there are going to be different inspection items. I would say watch out for all of the small items. Make sure everything is completed and there aren’t any loose ends. If projects are only 99% finished, the inspector is going to question the integrity of the remodel. For instance, make sure all of the electrical is in good working shape. Are all of the outlets turned on and are they all grounded? Make sure all your appliances and fixtures are working correctly. I would also check to make sure the water tank has straps, and that it meets the new construction code requirements. Your home is required to have smoke detectors and carbon monoxide detectors throughout. Another red flag in a home inspection are the gutters. Are the gutters cleaned out and do you have a splash blocks installed? Make sure that your splash blocks and landscaping are pushed away from the siding to keep the moisture away. Another common item is the furnace. Verify the furnace filter is clean and the heater and thermostat are working properly. Again, the most important thing is just to make sure all of your home is fully “buttoned-up”. If all of the small things are done, the inspector will likely be a little less particular in general. If the little things aren’t are done well, the inspector will assume the big things weren’t done well either.
“How do you know when to rent a property and when to sell it?” – Jaymee of Orting, WA
This is really a personal decision. You need to know what your specific financial situation is and set your own objectives. Is your goal to obtain the highest cash flow for the property? Is your goal to own a home that is going to have the highest amount of appreciation? Generally these two don’t go together. If your goal is to buy in a good area with the highest amount of appreciation then you will likely have less cash flow, and that is fine! On the other hand, if your goal is to generate a lot of income from your property, then you may want to look for properties with a lower acquisition price. Lower acquisitions tend to mean higher cash flow; the less you pay, the more opportunity you have for rental income. There are plenty of flip properties that we could have kept and rented. For some properties we really liked the area but we couldn’t leave money in the property because we wanted to move on to other projects. Again, it really boils down to your personal goals and your financial situation. It is all about liquidity management!
“What is the biggest challenge you face when remodeling a flip property?” – Max of Burien, WA
There are two things that are extremely vital to the process of flipping homes. One is to make sure you have a good team! The other is to make sure you have a dependable contractor. Find a contractor that you can trust. Find a contractor who will give you a clear itemized scope of work and set your expectations up front. It is important to get an itemized and fixed bid to define the scope of the project. Before you give your contractor their first check, you want to get them on a construction schedule and have them sign an agreement that matches the schedule you both agreed on. Do not base your contract off of time and materials. Everything with your contractor should be documented in writing!
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