Pro Tips from the Property Flippers: You Gotta Have Skin in the Game

Pro Tips from the Property Flippers September 2024 Edition

Lane Construction

Chris, of Lane Construction, shares his wisdom from over 30 years working in the industry. He got his start as a general contractor and quickly made the natural transition into investing. Over his journey he has accumulated a wealth of knowledge in which he is dedicated to passing on to the upcoming generation of investors who collaborate with him on his crew.

All these years later Chris continues to learn new techniques via his reliable network. His realtor surprised him by using the emerging trend of virtual staging for MLS photos on this flip.

Lane Construction partnered with Spring Valley to complete the renovation at 7240 Walnut Creek Dr, West Chester, OH 45069.

Purchased for $375,000 this professional renovation resulted in a May 2024 resale of $595,000.

Tips from the Flipper

Understanding not all investors come from a contractor background like himself, Chris' aim here is to provide practical advice that transcends experience. In many cases, it's just as important to know what to do as what not to do.

DO...

Invest in the flip (not just monetarily)- You got to have skin in the game. That means pouring your heart and soul into a flip for its duration...Doing as much of the labor yourself as possible, working hard, setting a structured work scheduled and if need be, forgoing the vacation until the project is completed. Without this level of commitment, both your profit margin and the quality of work will suffer. Time is of the essence; every day the property is in your hands, holding costs such as mortgage, taxes, utilities, etc. accumulate. Being in charge of the work ensures you are aware of the product's quality which is a key factor in your reputation.

Find subcontractors you trust- Building a reliable team of subcontractors is crucial. Tasks that fall outside your licensed or skilled scope must still meet your quality standards. Ultimately, it is your reputation that is associated with the project, not that of your subcontractors.

Network- On the subject of reputation, it's significant to note that a substantial number of my leads come from word-of-mouth referrals. The trust built with customers and colleagues over time frequently translates into new leads. If your reputation hasn't caught up with you yet, it's crucial to make your presence known. Some networking strategies include wearing clothing branded with your logo, engaging with people at hardware stores, establishing booths at local festivals, and informing your social network about you are doing.

DON'T...

Overdo the house- From a design perspective, with few exceptions, the goal is to create a high-quality product that resonates with a wide audience. The aim is to offer a blank slate that customers can transform into a home. Since people have various design tastes and needs, maintaining a timeless and "agreeable" color palette is key. Agreeable Gray paint, white subway tile, and soft color finishes possess the versatility to complement a wide range of design giving the buyer more freedom to decorate to their own tastes. Occasionally, real estate agents touring my properties suggest the need to follow trends to enhance value, yet I haven't observed this in practice. It is the feedback from buyers that has guided me to maintain the simple formula I use. From a budgeting perspective, it is imperative to understand what needs to be replaced and what can be maintained. Many of the older features are high quality and maintain the original character of the home. You can also enhance elements with paint, crown molding, tile and hardware.

Overextend yourself financially- Budget all aspects of the project. There are purchase costs, construction costs, holding costs and closing costs. You need to be aware of each and build in the appropriate contingency. Make sure you are buying right. Understanding the neighborhood comps and the real estate market is crucial to determine a realistic ARV. Deduct all your costs and desired profit from the ARV to determine your purchase price. Labor is the largest cost-saving area in property flipping. Undertake as much labor as you can yourself. If you lack the necessary skills, consider collaborating with those willing to teach and mentor you along the way. While initial profits may be lower, the long-term you'll reap the benefits in the long term. I typically use interest-only construction loans to fund my projects. Spring Valley Bank has been instrumental in financing the short-term funding I need, which is promptly repaid once the property is sold.

The Financer

Chris embodies his work ethic of diligence and sound financial decision-making in his personal life. As a father of two, he has steered his daughters through college, instilling in them the values of hard work and financial literacy. Growing up, they too were expected to have skin in the game with good grades, teenage jobs, and budgeting being mandatory in the Lane household. These are indeed valuable concepts to impart to the next generation.

A notable example of Chris' philosophy to "not overdo" on this project is reflected in the exterior finishes. Chris' choice to make small tweaks on the exterior resulted in a big impact on the curb appeal. The exterior and interior of the house benefited from the replacement partial window front door, new light fixtures instantly updated the home, and the freshened-up landscaping enhanced the statement of the house. It was like the house was screaming to be scene behind the overgrown bushes. These smart choices are a value add to the home.