Under Contract. Now What?!?!
August 26, 2016
It was not too long ago we had our first flip under contract. In less than two years, we are now onto our fourth property. While still new to the flipping business, we have learned a lot over the past two years. Probably the most important lesson is you can start working on your flip the day you have it under contract. Here's how:
1. When you make an offer, put in the Agreement of sale a request to have a few days where you can take measurements of the house, take pictures/video, bring your team in to look at the property, and give you estimates.
Two years ago when we bought our first house, we did all of these steps after we purchased the property. The renovation took over seven months to complete. During our post-analysis, we discovered that we could have saved over three months, if we had just taken the actions listed above. Since then, we execute the seven above actions for every house. It is because of those seven actions above, we are now on our fourth house in less than two years of business (three in this year alone)!
It was not too long ago we had our first flip under contract. In less than two years, we are now onto our fourth property. While still new to the flipping business, we have learned a lot over the past two years. Probably the most important lesson is you can start working on your flip the day you have it under contract. Here's how:
1. When you make an offer, put in the Agreement of sale a request to have a few days where you can take measurements of the house, take pictures/video, bring your team in to look at the property, and give you estimates.
- Pros: Solidify your renovation plan, and budget by obtaining estimates prior to your acquisition. Provides another opportunity to double-check the renovation scope (this is extra beneficial if you were rushed at the first viewing, or if you were not allowed in the property). If there is an aspect that is new to your renovation, or if you do not have a dedicated rehab team, it provides the ability to get multiple subs in to provide bids. Taking pictures/videos allows you to review the property when you are not there, as well as provide “before” pictures of the project.
- Cons: None.
- Pros: When selecting your subs, you will be able to provide a tentative schedule.
- Cons: It's a lot of work, but remember Proper Planning Prevents Poor Performance.
- Pros: Selecting your contractors, allows work on the house to commence the day you get the keys. Selecting your subs, also allows you to get all paperwork (contract, SS#, proof of insurance, and license) completed in advance, so they can focus on your house. Providing dates to your subs allows for them to be available when you need them.
- Cons: You need to stick to your schedule! Without sticking to this schedule, you run the risk of a downstream contractor having a conflict because you bumped them earlier.
- Pros: Any delays caused for permit approval is drastically decreased by submitting on Day 1. Having the drawings in advance also allows your subs to accurately estimate the work needed for the renovation and finishes.
- Cons: You need to pay the architect. Thus, if you decide not to move forward with the house for any reason, most likely you will still need to pay the architect.
- Pros: Setting up a business account for the first time with a provider can take time, and cause a delay in your project. Establishing utility accounts early ensures the house will have all necessary utilities working on Day 1.
- Cons: If there are any changes to the settlement date, you need to call back and update the companies with the new effective date.
- Pros: Materials will be there in advance of the subs needing them.
- Cons: Materials take up space. They will need to be stored somewhere that is out of everyone’s way. And lastly, you are buying items prior to the house actually closing.
- Pros: Starting organized, creates a higher likelihood that you will stay organized.
- Cons: Administrative work can be tedious, and it is definitely not the glamerous side of the flipping business.
Two years ago when we bought our first house, we did all of these steps after we purchased the property. The renovation took over seven months to complete. During our post-analysis, we discovered that we could have saved over three months, if we had just taken the actions listed above. Since then, we execute the seven above actions for every house. It is because of those seven actions above, we are now on our fourth house in less than two years of business (three in this year alone)!