As a real estate investor, if you want to make money, you need to get a good deal on the price of your flip houses. You cannot count on making up for expenses in buying and fixing a property when you sell it because, in most cases, you aren’t going to sell a flip for higher than market value. Unfortunately, sometimes when you’re flipping houses you’ll get what you think is a great deal on a house, but then you’ll find out that it needs a lot more work than you initially thought.
That happened to us not too long ago when we were filming the “Pipe Dreams” episode of Flip or Flop. Christina spotted a “For Sale by Owner” sign in front of a house, and we jumped on it. The comps in the area were selling for around $525,000, and when we looked at the house it really seemed like it only needed cosmetic improvements and a few updates. We got the house for $400,000, and we were sure that we’d be able to rehab it for $35,000 in about four weeks. That would’ve been a profit of $65,000 in one month!
When Good Deals Get Expensive – Ask About Options and Discounts
Then our contractors got a closer look at the house, and things got scary. Everywhere we turned, we needed to make major repairs and improvements, and the price just kept going up.
That’s why I love asking, “Can I get a discount on that?” Whether we’re talking about materials, labor, or closing costs, when we’re flipping houses, I’m always looking for ways to save money. Remember, the more money you save on buying the house and rehabbing it, the more money you’ll make when you sell it at market value.
Hit the Bargain Bin
You’ll notice, on the show, whenever Christina and I go shopping for appliances, fixtures, countertops, and/or cabinets, I always head straight to the back of the store. The displays at the front of any store are going to be devoted to the newest, “latest and greatest” products.
The cabinets, pulls, and faucets you see up front are going to be gorgeous, but they’re also going to be expensive. There’s nothing wrong with last year’s model if it fits with the style of the house you’re flipping, and you can usually get a discount. Don’t be afraid to ask.
Get to Know Your Contractor
Now, you won’t see me doing much negotiating with our contractors on the show because I know that they’re the experts. They aren’t trying to price gouge us, and they always charge us fair rates for their services. That said, we probably get a slightly better rate from the guys we work with because we work with them so often.
If you’re just starting out as a real estate investor, it pays to get to know your local contractors and let them know that you’re going to have a lot of work for them. The more you call them to put them to work, the more likely you are to get a discount on labor whenever possible. So be a good house flipper and be loyal to your contractors.
Don’t Forget to Negotiate on the Price of the House
Of course, you can’t make up for spending too much on the house by cutting corners on the rehab. Real estate investors only make that mistake once before they learn how expensive it can be. If you can, get an inspector to walk through the house before you make your offer. Flip houses can hide a lot of damage, as you’ve seen on our show, but flipping houses can be really lucrative if you negotiate low prices and get a great deal.