Wendy McKinney is one of those people who watches renovation shows on HGTV and cringes, yelling at new flippers as if they were a sorority girl going for a stroll in a scary movie.
“With some of them you think, ‘Oh my God, you idiots! How could you? Oh, jeez! Don’t!’” she adds, laughing.
“It is not something for the faint of heart in any way whatsoever, and people really need to have some knowledge about construction and experience in real estate or you can so quickly get in over your head.”
Getting your financing in order is the very first thing new flippers need to figure out, and that includes adding in for unexpected costs and contingencies, insurance, property taxes, home owner association fees and more.
As important as having your financing in place is surrounding yourself with a good team says Chuck Ward, Knoxville real estate investor.
“Hire a good home inspector if you’ve never flipped a house,” Ward says. “Find a good Realtor because a good Realtor is worth their weight in gold. They know the area. They know what it’ll bring when it’s fixed. They know what it brought when it was sold the first time before it was foreclosed on.
“Good Realtors are gold. Don’t hire people that don’t know what they’re doing.”
Get bids from multiple contractors, including ones who have been referred to you. In a hot real estate market, good ones are invaluable, and if you have a good relationship it can affect where you fall in line in their work load. Of course, extra money might help you get higher priority.
“My plumber, he’ll make me a priority and has ever since I met him,” explains Troy Dean Shafer of Nashville Flipped. “But some people, you just get on the list. Then you’ve got to take into consideration waiting weeks for the electrician to come and wire the house and bumping back the drywallers.
“There’s just so many things you can’t do if you’re on a waiting list, and so at that time, you do start negotiating.”
And don’t get scared off by other investors with all-cash offers.
“Cash doesn’t matter,” says Robert Coakley, president with the Real Estate Finance Group in Knoxville.
“If you’re approved for a loan and I’m the seller, I don’t care if a cash buyer comes along. Cash buyers can change their mind the day before closing and not be out anything but maybe earnest money, where a person getting a mortgage, they’re invested and have been through this month-long ordeal.
“They’re not going to walk away unless they really have to.”