House flipping is more popular now than ever. All potential investors see is the excitement and opportunity; however, flipping comes with its share of headaches too. Here are some common ones to be aware of and remedies to help smooth them out.
Weather Delays – When it comes to refurbishing a potential flip, one factor that you can never control is the actual weather you will be working with then. Unfortunately, even the wealthiest investors can’t spend money on consistent, pleasant weather to get all the necessary work done smoothly. Despite the best predictions, inclement weather can always rear its ugly head when house flipping.
For example, blocking out time and hiring a painter crew to handle the exterior should go well. However, when a thunderstorm forms and brings with it, harsh winds and rain are going to put that paint job on hold for a good minute. Or, perhaps your landscaping crew would like to take care of rehabbing the front and back yards, but the extreme heat has spiked to nearly 100 degrees, and your team can’t get the job done in those conditions.
When those delays happen, it’s always best to have a Plan B built in. Expecting that thunderstorm to last all day? Move your painters inside to handle repainting the exterior until the storm passes, and the exterior dries out sufficiently. The heat index expected to spike by early afternoon? Then schedule your landscapers to come early that morning, plan out what can be handled and completed before the temperature’s supposed to kick in and get to work. The point ultimately is always to stay proactive because inevitably, the weather will bring delays that are unavoidable. However, with the right mindset and flexibility, they can almost always be worked around to keep you on time and budget.
Theft – Another issue to worry about on-site is theft; tales of stolen air conditioner units, tools, building materials, etc. are common, unfortunately. As far as actual thieves go, the options vary from garden variety criminals searching around neighborhoods for quick, easy scores to sometimes the very contractors and workers you hire for that job. While theft is common, there are ways to protect your project against it.
First, always install new door locks before work begins to protect your interior and any valuables located there. Second, secure the backyard from burglars by installing a fence and gate too. This not only allows for protection but also privacy from prying eyes who may be looking for potential targets before committing to a robbery. Third, take the time to invest in a reliable alarm system and motion detectors to keep the property safe when no one is around. Fourth, one of the best anti-theft defenses is also the simplest option – don’t post a For Sale sign.
As silly as that sounds, For Sale signs tell people two things, 1) this property is available to purchase, and 2) it’s likely going to be empty until purchased. To the wrong people, that sign paints a giant target on your property. Remember, you’re the one footing the bill for this project, and ultimately it’s an investment to make money. Protect your house flipping investment, or else someone else will take your profits away.
Additional Delays – Besides previously mentioned inclement weather, there are any number of other mishaps that can create delays in your house flipping schedule. Contractors and crews could be unavailable to show up because of delays on previously-scheduled jobs. Building materials could arrive late or not at all because of poor supply management. Equipment breakdowns can slow down progress while everyone waits around for repairs or new equipment has to be brought in.
On top of those issues, there are almost always personal problems cropping up – illness, individual issues, unreliable workers, etc. Furthermore, delays on one task can inevitably lead to others, i.e. if your paint crew hasn’t finished up reworking the interior first, then the floor crew may be forced to wait to do their part. Again, the best defense against these issues is a carefully-planned offense. Think through potential problems and develop backup plans before spending a penny, have multiple contractors available to you as options in case one can’t come through, carefully vet your construction crew before hiring.
Unexpected Expenses – When you were checking out the property before purchasing, did you know that there was mold behind some of the walls? Were you aware of the rotting wood in the attic or beneath the floorboards? The plumbing almost ready to burst because of deteriorating water pipes? Probably not often. However, these issues often come up, and if you’re not ready for them, they’ll cost more money to fix than you planned on spending. The best thing you can do is assume and plan for what you don’t know instead of just accepting what you don’t know.
Research potential house flipping problems like the ones above and determine their potential repair costs. Then, when figuring out your overall budget, build in contingency funding to tackle the problems you’ve assumed could happen. Even if they don’t occur, having the foresight and cash on hand to fix them quickly is better than being blindsided. Furthermore, it’s easy to plan and budget for such issues before work begins than facing it during renovation and figuring out where to find money to fix them while keeping everything else on track.
If there’s one lesson you should take away from all this doom and gloom is this – planning will save you money and get things done. But what about the rest of your business? Once you finish refurbishing and selling your flip, are you making sure to protect most of your profit? All that hard work ‘s hard to justify when the fruit of that labor is consumed by excessive taxes. Are you flipping houses to save for your future? How are you doing so?
These are questions that every real estate investor inevitably faces when looking ahead to their future. If you aren’t planning as carefully for it as you would your potential flips, then you’re inviting trouble down the line. Thankfully, we have decades of experience helping people like you protect their hard-won house flipping earnings from excessive taxation and potential liability. Our team of attorneys, advisors, and CPAs are available to provide you comprehensive asset protection structuring and tax management in a one-stop-shop manner.
If you’re interested in learning more and how we can start helping you today, then click here to schedule a free 30-minute strategy session with one of our advisors. It takes one a minute to complete and will be one of the best decisions you’ll make for your financial present and future.