Nothing sucks up money and eats into profits like a house sitting vacant so it’s an enormous mistake to buy a house and then have it sit for days, weeks, months before the repairs and work gets done. Trust me, I’ve made this mistake before and all of a sudden I’ve spent $1500 just on interest payments.
DON’T make this mistake. Get prepared to flip your property fast using the “7 Steps to Prep for a Fast Fix and Flip.”
So lets first assume you’ve found a bunch of good deals and you’ve made offers on several properties. Next an offer is accepted and you now have the property under contract. This includes your bid being accepted, executing the final contract, having the seller execute their signatures and some earnest money. From the time your bid is accepted to the time you close is about usually between 2-5 weeks.
What does this mean? It means you have about three weeks of prep time.
7 Must Do's Before Closing Day
There are a few things you MUST do in this three-week period to make sure that you hit the ground running when you close and you’d don’t lose valuable time like I mentioned above.
I recently purchased a house on Victor Ave for $37,000, set up my private lender to get $75,000 of funding and got $38,000 cash back at closing for rehabs, utilities, insurance etc. and while we were getting prepared to close on it, there were a few very important things that we did:
- Secure the House – we usually do this one to two days prior to closing even though we aren’t supposed to do it until we own the house. We go to the property and make sure it’s secured. We change the locks and add our own lock box. We check the side and back doors and windows. We want the property to have good locks to make sure it does not get vandalized. The last thing we want is to close and find out 48 hours before closing the house had a water leak.
- Measure EVERYTHING – the windows, floors, walls, countertop and cabinet space, etc. If you have this done in advance, you can be prepared to order everything quickly and have it delivered the week after you are done with the demo and the mechanicals.
- Order a Dumpster – so the day after you close, the dumpster shows up so you can be ready to start demo. Dumpsters usually cost between $350-$500 bucks.
- Schedule your Demo Crew – make sure the crew who is coming in to demo your property are set up and ready to fill the dumpster the day after you close. This includes tearing down walls, throwing away old cabinets, countertops, doors, windows, old carpet, fixtures, water tanks etc.
- Decide What You are Going to Save in the Property – this can be anything from the hot water tank to the roof, the windows or the bath tub, the doors or the tile flooring. Make sure before the demo crew comes in, they are prepped on what you are going to keep so they don’t demo it and ruin something that was savable.
- Test the Utilities – make sure the water and electric are working and that none of the pipes have any leaks or cracks in them. You want to make sure this is done BEFORE the demo begins, so you don’t have to tear into any freshly built walls.
- Purchase a “Coming Soon” Sign – once you buy the property and you are working on the rehab, you want a “Coming Soon” sign in your front yard so people know when construction is complete, you are putting the property on the market.
Time Is Money
The one thing to keep in mind here is that in real estate, time is money, ALWAYS. If you are using private lenders, every day, financing costs are happening. It might be costing you $20-25 a DAY in private lender interest. If you are using a hard money lender, it may be costing you up to $50 a DAY in interest.
DO NOT let the silent costs eat up your potential profit. Make sure you are prepared and use your three weeks between your bid being accepted and closing appropriately so the very next day, you can get in and get the work STARTED.
Another incredibly important task you need to complete in your three weeks before closing is getting your rehab budget, schedule and scope of work written out with your contractor.
Things you will need to nail down are:
- Setting a Budget – prepare an Excel document that itemizes each repair that needs to be done within the property itself. This will be a great way to keep track throughout the rehab and a place to keep your estimates from all subcontractors.
- Setting a Timeline for Completion – after you receive all your estimates, finalized the scope of work and pricing with each of the subcontractors, it’s time to plan a time line for completion. You and your contractor must do everything in your power to hold all the subcontractors accountable for the prices they gave you so you don’t go over the budget.
- Use a Scope of Work – this really does help to get all the subcontractors to work together so the project ultimately goes as smoothly as possible. At this meeting with all the subcontractors, set the best logistical order for all to work. Create a schedule with dates and give to all the subs and tell them both you and your contractor expect everyone to meet the dates that they helped determine.
This will help on day 1 when the property becomes yours to alleviate any surprises of when your construction crew is going to stop and when they should be done and especially for how much things are going to cost.
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