There are dozens of television shows that paint a fantasy picture of how to, very quickly and painlessly, flip a house. Over the course of an hour, ordinary people roll up their sleeves, tackle some home renovations, slap on some paint, and have an entirely new house.
Sadly, it isn’t this easy in real life.
There’s a reason you don’t know many people who have flipped homes. Taking a fixer-upper and transforming it into your dream home requires education, training, connections to great trades at sub-market rates, and the proper tools and safety equipment, not to mention a lot of time and money to dedicate to the project.
Carpentry, electrical, plumbing: You may think you have the handyman skills to do this all yourself, but in reality it can take a long time to master all of these skills. Even with excellent woodworking skills, for example, you may not know how to ensure structural integrity when building with wood.
Plumbing and electrical are a whole other story. If plumbing is done incorrectly, it can quickly ruin your home without you knowing, (until it’s too late and a minor leak has turned into a collapsed ceiling). Electrical is dangerous to begin with; figuring out how to properly wire a home through trial and error can leave you or the new buyers seriously injured.
The bottom line is that the tradespeople who do this for a living are highly trained, wear the correct safety equipment, and are worth the money they’re paid to keep you and your family safe and secure.
It’s one thing to work on a fixer-upper as a hobby. There are people out there with construction skills that can be used to renovate a home—and that’s great! If you’re in no rush and know you have the skills to do so, large-scale renovations can be a great idea. Remember: the longer a project takes, the more mortgage payments you make, and the less the project profitability will be.
The problem is that many people believe they can flip a house and make a quick buck. In reality, “professional flippers” are either tradespeople themselves, or hiring contractors and dealing with a lot of properties and moving pieces at once and getting bulk pricing. For you to renovate a fixer-upper takes much longer, as you’re performing all the upgrades yourself.
Here’s a rough timeline of how long it takes to flip a house, from start to finish:
On home reno shows, you’ll often hear the experts say that certain changes will “only cost” so much. Sometimes they’re right, but oftentimes you’ll be dealing with unforeseen circumstances that can throw your budget out the window.
Also, when you hear the profit margins on television, it’s hard not to get excited, but they’re leaving out important information. For example, they could say you buy a home for $240,000, put in $20,000 worth of renovations, then turn around and sell it for $300,000. Sounds pretty great, right?
|Closing costs (up to 4%)||$9,600|
|Renovation costs (approx. 15%)||$36,000|
|Agent costs when selling (2.5% to both the listing & buyer's agent)||$15,000|
Note: This doesn’t include carrying costs for the property, including mortgage payments and utilities!
In this situation, you will break even, give or take a few bucks. Buying right is paramount; you need to buy in an area where your renovations will result in a home with a value great enough to cover all costs, which will pay you for your time.
If you’ve read all of this and still think flipping a home is for you, you’re going to need building permits. These permits are provided by your city and essentially ensure that the renovation meets standard requirements for zoning, health, and safety.
You need to obtain a building permit if you’re making significant changes to the home, (which most house flippers will be doing). This includes taking down walls, making new doorway or window openings, inserting a fireplace, or adding a new addition onto the home.
Someone will assess your site and make sure you’re meeting building codes, including structural integrity, zoning regulations, and heritage building designations. On top of this, you may have to get separate permits for electrical and plumbing changes.
If you do work on the house and don’t get permits, you could be asked to undo the work at your own cost if you don’t meet building or zoning requirements for your city. It’s best to take the legal route and do things properly.