Before thinking about investments or making you way to generate profit from "buy-renovate-sale" idea, first it may be useful to think about possible "pro's" and "con's" regarding the home renovation in general and flipping house in particular. Here are few points to consider:
Number one - The potential of property. This should be thorough analyzed before moving forward. With 3L approach (location, location, location) there are also other factors that will affect the project plan and return on investment. The quality of environment and neighborhood is mostly driven by location and price category that will require corresponding quality and level of renovations. There is no sense to invest, let say, 50,000 in kitchen upgrade if house cost is less that two hundred, for example. The potential of any property, optimistically, is very rare more then third (or quoter) part of initial price, even in foreclosure case. Consult you real estate agent to find out the sold properties in area. After, ask to provide the prices, that they were bought for by previous owners. This will give the idea about trends and overall brackets for price fluctuations in particular area. This biggest mistake in better case scenario can cost people barely covering the expanses when they buy property, invest in renovation and selling that after. Basically, it means that mistake was made when house was bought, not sold.
Number two - Know what renovations you are going to do. Again, turn around and assess the property potential before demolition. This is good when it can be easily re-planned, but this is bad when, for example, wall you want to remove happened to be supporting and you should use engineered and therefore, costly alternatives, to keep structural strength of the house. From other side, just fresh paint and floor sanding alone will not really bring additional value to property and will not gain much in price difference.
Number three - Avoid extended project plans and long-term commitments. Seasonal fluctuations in pricing, market and public demand should be in sync with your project deadlines (with some contingency, of course). Let say you know the property, location is fabulous and the potential of upgrade is promising. However, if you miss the hot spring selling season still when finishing the project, this will cost you few months of extended mortgage, percentage on loan that can deplete all your profits.
Therefore -Number four - have project plan ready before starting. I sounds maybe weird to have it in advance, before even property assessments, but generally, it is possible. If you have template, you need just modify it for particular property. Though, the main steps are always the same - demolition, framing, systems (plumbing, electric, HVAC, you name it), wall and finishing, however, it is crucial to coordinate all of them. For example, the importance of dependencies is huge, you need to plan systems before you have walls covered. Sometimes you need to rip off the drywall to put forgotten wires or cables, but sometimes you can go mad because of repositioned plumbing pipes require to strip off the tiles you just made. Re-work is costly not only because of double expenses, it costs to you also your time and jeopardizes the entire deal outcome.
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