Want to flip homes like you see on HGTV? It’s not simple, but you can master it by putting in the work. At a recent meetup, we talked with Katie & Ashley Ciochetti. These two have over 10 years experience flipping homes in Asheville and have a proven system.
In order to make flipping homes a sustainable economic plan, listen to the pros and don’t try to cut corners.
How do you find a house worth flipping? The Ciochettis have some great tips.
Work with wholesalers and look for off-market deals. This is a different world when it comes to home-buying. These sellers expect a quick closing with no concessions, inspections, or appraisals. You can also look for homes for sale in unexpected places like Facebook marketplace, or maybe a “For Sale By Owner” sign in a yard. For these homes, you’ll go in expecting the worst, which is definitely a higher risk.
Don’t want to take that risk? You can find great properties on the general market. Know what location you’re focused on and do lots of research in that area. Once realtors get to know you, they will bring distressed sales and properties others may not want.
In order for realtors and lenders to get to know you, you need to work hard at connecting and networking. Create a good reputation with trusted people who can give you great references.
Make backup offers. Don’t let the fact that a property already has an offer on it stop you. By making a backup offer, the realtor will offer you the home if that first deal doesn’t work out.
Katie and Ashley don’t have a one-size-fits-all buying criteria. Generally, they focus on area/location and price. A property selling for under $200 per square foot is ideal. But it all depends on the home. They don’t have a size or number of beds and baths requirement – they look at everything individually.
Funding the Project
If you have a lot in savings, it may be possible to fund your project alone. However, most flippers need to find financial assistance from a lender or investor. You can look at options from banks to independent hard money lenders and see what works best for you.
Look at the variables carefully. Larger banks have lower rates but require more work like the type of portfolio and appraisals. Working with a private lender will have a faster turnaround and less paperwork. The higher interest rate can be worth it for your project.
However, you need to prepare for these risky moves. Make relationships with different lenders like Katie and Ashley did, and learn which is best for novices and more experienced flippers. Because of the different rates and pacing, it definitely depends on your experience and comfort level.
For hard money loans, the lender is looking at the property value and not necessarily you and your credit score. This may be a better choice if you don’t have a traditional W-2 career, but are able to pay back loans quickly. Eighteen months is the longest term loan, so these turn around fast. Again, it’s a big risk since you’re on the hook.
However, interest payments can affect your cash flow in a big way, especially when you’re paying for construction.
Make sure to take all costs into account when creating a preliminary budget. For a rehab project over $30k, the city of Asheville requires a general contractor. Usually, you’ll pay the contractor 10-15% of construction costs. Make sure all workers are licensed and above-board, so you have permits and the entire process goes smoothly. This adds a layer of security in an ever-changing process.
Katie and Ashley also note that holds are an option, and some banks can help you diversify with fix & hold projects. When considering whether to hold or sell, they recommend you hold the cheap deals you can fix and hold without a note. Perhaps the area is set to go up in value in the near future or you may like the property for yourself. Consider holding in these situations.
Construction & Design
When it comes to the details on a home you’ll flip, pay close attention to your plan. Is your team following that plan to a T? It’s up to you to be present and ensure it’s all coming together properly.
Katie & Ashley have a trustworthy team of licensed workers (electricians, plumbers, HVAC techs, etc.) to work on their projects. Mutual respect and helping them when you can is essential to maintaining the relationship. You need to be nice and create and keep a good rapport, so they’ll take pride in their work and work with you in the future. Katie is working on becoming a licensed general contractor, so this will give her additional control over the rehab and design process.
When it comes to appearance and color scheme, you may want to enlist the help of a design professional. Keep up with trends and pay attention to what buyers are looking for in your area. Lean on resources and people with experience in your network.
When it’s time to list a home, Katie and Ashley almost always stage homes to sell. Their colleague Gwenn Frederick has a company that specializes in staging, so she is their go-to expert. Don’t assume you can do everything yourself. Use a professional photographer to market the home properly. With more people searching for homes online, good photos are key to standing out in the Asheville market.
The Ciochettis under-price the home by about 10% since time is important to them. This is because of the higher interest and holding costs. In addition, with a lower price, you often get more people in making multiple bids and the home sells for above the asking price. When setting the price, keep in mind that just because you go over budget doesn’t mean you can charge more for the house.
If you pay an inspector ahead of time, you can make sure to fix all problem areas before the time crunch when selling. But if the buyer wants other necessary fixes, make them. Haggling over details will just bog down the selling process.
Listen to our podcast episode for all the anecdotes, tips, and laughs from this special live event.