If you possess carpentry or construction skills, you can easily make money remodeling homes. This is a business that will always be in demand no matter what is going on in the housing industry.
This is because homeowners will always want to improve the value of their homes to make it more sellable and buyers will also make improvements on the homes they just purchased. Most people who buy new homes are likely to make improvements within the first one year.
- Why The Remodeling Business Is Attractive
- How to Get Started With Home Remodeling
- What is The 70% Rule in House Flipping?
- Can You Make Money Remodeling Houses?
- How Can I Make Money From Home Improvements?
- How Much Does a House Flipper Make a Year?
- Is Remodeling a Good Business?
- How Can I Flip Houses With no Money?
- Are Renovations Profitable?
- How Much Money Can a Home Remodeling Business Make?
- When Remodeling a House Where do You Start?
- How do I Start my Renovation?
- What do I Need to Start a Home Improvement?
- What is a Buy to Sell Mortgage?
- Why Flipping Houses is a Bad Idea?
- What is a Good Profit to Make on Selling a House?
- How Much Does a House Flip Cost?
- What’s The Difference Between a Renovation And a Remodel?
Why The Remodeling Business Is Attractive
If you have acquired experience in the building industry, it will not be difficult for you to make money remodeling homes. You simply have to turn your trade skills into a business. When the housing market is down, most homeowners hold on to their property and spend money on upgrades, enlargements and customizations.
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There are a lot of self-employed individuals in the remodeling business because it does not require a lot of capital. Most homeowners would rather turn to a professional instead of working on their home by themselves.
How to Get Started With Home Remodeling
Choose A Specialization
Choose an area of specialization when you start your remodeling business. You can decide to work on commercial structures or residential. Commercial remodeling may involve working on renter-occupied buildings, rehabilitating historic structures, remodeling office buildings and adapting structures to another type of use.
The work of residential remodelers may include the renovation of historic residences, remodeling apartments and condos, the restoration of homes that are damaged by water, fire or other natural disasters. You may also choose to specialize on specific styles of architecture. A further way to specialize is to work on projects such as greenhouses, sunrooms, bathrooms, kitchens and so on.
Success Factors
If you want to succeed as a remodeling contractor, it is vital to have a lot of experience in the work that you do. You should also be ready to hire other people to handle areas of the job that you cannot do competently. You should also be knowledgeable about scheduling, buying of materials, supervision of employees and subcontractors so as to produce satisfactory work for your clients.
It is also important to get the necessary license from your state’s licensing agency. There are also certifications that will enable you to launch a successful business. These certifications are available in different categories therefore choose the one that is most appropriate for you.
Getting Clients
Client satisfaction is vital to the growth of any business. If you want to make money remodeling homes, you have to ensure that you provide satisfactory service for your customers. If your clients are satisfied with your work, it will be easy to get repeat business as well as referrals. Make sure you use the best materials and complete projects on schedule.
You can get your first customers by working as a subcontractor for building material distributors and retail suppliers or doing installation work for lumberyards. Developing a good relationship with architects, insurance professionals, local lenders and home inspectors is also important. These people can also help you to get clients.
What is The 70% Rule in House Flipping?
Home flippers have a simple plan for earning money: They buy a home cheap, fix it up, and then sell it at a higher price. The goal for flippers is to buy low and then sell high to boost their profits.
The 70% rule can help flippers when they’re scouring real estate listings. Basically, it says that investors should pay no more than 70% of the after-repair value of a property minus the cost of the repairs necessary to renovate the home.
What does this mean? The after-repair value, or ARV, of a property is the amount that a home could sell for after flippers renovate it. When buying a home to flip, investors need to estimate how much they think the property could sell for after it’s been renovated. They can then multiply that amount by 70% and subtract it from the estimated cost of renovating the property.
The resulting figure is the highest price that flippers should consider paying for that property.
The key here, though, is to realize that the 70% rule is just a general rule of thumb. Before buying any home, you need to study market conditions, work with real estate professionals to get a more accurate resale estimate and meet with contractors to determine how much repairs will cost and which renovations are needed.
The 70% rule relies on a simple calculation:
After-repair value (ARV) ✕ .70 − Estimated repair costs = Maximum buying price
That maximum buying price will give you an idea of how much you should spend on a home that you plan on renovating and reselling. Going above that price could jeopardize your profits.
Can You Make Money Remodeling Houses?
Yes, real estate investors who flip homes, or house flippers, can earn a hefty return over a relatively short time frame. But house fix and flips involve a lot of work – far more than what reality TV stars make it look like.
This doesn’t even cover the risk in being a house flipping investor. Yes, you can earn $50,000 by flipping a house, but you can also lose money if you don’t grasp how to flip a house first and leap before looking.
Flipping houses involves buying a property, renovating it, and selling it for a profit.
House flippers take properties that most homebuyers aren’t able or willing to renovate, and improve them to the point where they meet buyer demand. Keep in mind that the average homebuyer wants a home that’s move-in ready, so house flipping investors put in a lot of effort for a shambled home to be completely redone and ready to move in without any further work needed. It will take time, labor, and money.
How Can I Make Money From Home Improvements?
You don’t have to spend months (or many thousands of dollars) with a contractor to get your home ready — many small DIY home improvements can yield big returns on closing day. Here’s a look at five of the best.
1. Painting
Painting is the lowest cost improvement with the highest rate of return, so it’s not surprising that 36% of home sellers choose to do it, according to Skylar Olsen, Zillow’s Director of Economic Research. When trying to sell, a nice coat of neutral paint can give the entire house a facelift, and buyers really love to see a fresh blank canvas.
“Consider getting color recommendations from a trained professional since paint colors can be tricky depending on lighting and other features in the house such as cabinets and flooring,” says Jennie Norris, chairwoman for the International Association of Home Staging Professionals. If you’re looking for a “safe” color, gray has been trending in recent years, Norris says.
Initial Cost of Investment: Professional painting of the interior of an entire 2,500 square foot house can be anywhere from $2,000-$4,000 depending on the market, according to Norris. If there are vaulted ceilings or a lot of detail work, it could be more.
2. Landscaping Your Yard
The outside of your house is a buyer’s first impression when they pull up. A patchy or overgrown yard can be a major turn-off. Anything that’s dead should be removed, and anything that’s overgrown should be cut back. You can make sure the lawn is refreshed and green by re-sodding or planting grass seed, and you may want to do edging to help define spaces.
Also, fresh mulch or straw in any beds is a must. “A few newly planted shrubs and perennials tucked in for good measure will make your house feel much more finished and inviting,” Matke suggests.
Initial Cost of Investment: Professional landscaping can cost anywhere between $500 – $3,000 (and higher if you add in tree removal) according to Matke.
3. Flooring
Replacing carpet or repairing flooring is an improvement that 26% of homeowners make, according to Zillow. If you’ve got lots of rooms with many types of flooring, you might want to bite the bullet and invest in new flooring for all, to create a seamless feel throughout the house.
Wood floors, or even faux-wood floors, are preferable to carpeting even though those options can be more costly, Matke says. If, however, you can’t afford to upgrade to wood, new carpeting is still a major selling point. And just like with painting walls, a good neutral color is best.
Initial Cost of Investment: For professional flooring installation, expect to pay between $10 – $12 per square foot for faux wood, and up to $30 for real wood. An average quality carpeting will cost about $8- $12 per square foot, installed, says Matke.
4. Bathroom Update
A mid-range bathroom update (think natural stone for countertops, not high-end quartz) offers a great return on investment, according to data from Zillow. And a bathroom that looks old can really date a house, Norris says.
A few lucrative bathroom updates could include: new counter tops, new tiling, frameless glass doors (get rid of the brass or metal), new cabinets, and new fixtures for the sinks and tub. When replacing cabinets, remember that minimalism is best — neutral colors, and no designs or raised panels.
Initial Cost of Investment: The cost of a mid-range bathroom remodel averages between $3,000-$12,000 according to Zillow.
5. Update Lighting Fixtures
Replacing lighting throughout a house can be a simple update for a small investment — but it can make a bit impact where appearance is concerned, Norris says. As you look at options for chandeliers, pendant lighting, and ceiling fixtures, remember to keep colors consistent with your home’s hardware.
For example, you can mix metals such as copper and oiled bronze, or brushed nickel with chrome, but you wouldn’t want to mix gold and silver tones. Keep in mind that older brass fixtures can look dated, since they were often used in properties built in the 80’s and 90’s. In other words, if you’re going to the trouble to put in something new, make sure it offers a true update.
Initial Cost of Investment: Light fixtures for dining areas or pendant lights can be a few hundred to thousands of dollars, depending on source and style, Norris says. But there are often good deals to be found at places like Ikea, Home Depot, Lowes, and other stores that cater to the DIY crowd, where some fixtures can cost under $100.
How Much Does a House Flipper Make a Year?
The amount of money you can make flipping houses largely depends on how many houses you can flip, not in finding a single house that will net you a huge profit. One of the most consistent house flipping tips you’ll see is to search for houses where you can make a clear 10 percent to 15 percent profit on the sale after paying for repairs, realtor fees, title fees and financing.
While those numbers can change depending on the price range that you’re working in, most experienced flippers hope to make around $25,000 per flip, although they always hope for more. What they won’t do is buy into a house that will only give them a profit of $10,000, which could be eaten up if there are unexpected expenses during the repair process.
Is Remodeling a Good Business?
Starting a home renovation business is a winning move in practically any market. There is no shortage of home improvement business opportunities, since homeowners are either improving their homes for long-term enjoyment, or sprucing them up to increase their market value for resale.
Unlike many of today’s desk jobs, remodeling is a great opportunity to work with your mind and body. The start-up costs are relatively low, making it a great career choice for any independent contractor.
While flipping houses isn’t for everybody, it does offer the possibility of positive returns for those who have the skill and ability to invest wisely and work diligently.
How Can I Flip Houses With no Money?
There are a few different routes you could take if you’re hoping to flip a house without a significant out-of-pocket cost. The right one for you will depend on your personal finances and credit, your experience and skills and how much you hope to earn along the way.
Hard money lending
Hard money loans are perhaps the most popular option for funding a house flip without any cash down. These loans, offered by hard money lenders, are intended to be short-term in nature and are asset-based, meaning that they are secured by real property (i.e., the house you are purchasing).
Taking out a hard money loan often comes at a higher price tag than, say, a conventional home mortgage . The benefit, though, is that most of these loans are based on the home’s projected value once the flip is complete. This projection, called the “after-repair value” or ARV, allows investors to borrow more against a property than they would with a traditional loan, which is based on the appraised value at the time of purchase.
Hard money lenders are typically a quicker source of funding than traditional loans, as well. In fact, hard money funding can be completed in less than a week, in many cases.
Though hard money lenders don’t base their underwriting as heavily on the investor’s credit history, financial strength is taken into account. And if you’re interested in flipping houses with no money down, you should ideally have good credit, solid cash reserves, equity in other property and/or real estate experience.
Without any of these, you may have to work a little harder to get approved for your hard money loan.
Private lending
For many investors, private lending is the go-to funding [source for flipping properties].
Unlike hard money lenders, private lenders are not affiliated with a bank or other financial institution. Instead, they are individuals with available capital, who are willing to personally lend money to ambitious investors.
Private lenders are not bound by the same rules and regulations as traditional lenders and financial institutions, allowing for a bit more flexibility throughout the borrowing process. They can have funds available in a matter of days (or in some cases, hours), making this a much faster option than a bank loan.
Because private lenders are essentially able to set their own rules, borrowers’ experiences may vary, which includes everything from the loan term to the borrowing limit, interest rate and even how the loan is secured. Some private lenders have specific financial stability and/or real estate experience requirements, while others will simply look at the project and its projected profit margins to decide if they’re interested or not.
Private lenders can be individuals that you know personally, such as relatives or friends with extra cash on hand. You can also look for interested private lenders through peer-to-peer lending platforms (such as LendingClub or LightStream) or by making connections in real estate investing circles.
Find a partner investor
An easy way to secure funding for a house flip is to partner up with an investor. This means finding someone with both capital and an interest in the project, who is willing to fund the purchase and renovation.
A partner investor is similar to a private lender in that there are no hard-and-fast rules. The two of you can set your own rules in terms of funding, requirements and how the house flip will be managed. You’ll also both need to agree on how the proceeds of the property will be split; a partner will likely demand a share of the profit, rather than a set interest rate on the loan.
This is exactly how the first flip looked for Marina Vaamonde, a real estate investor and the founder of HouseCashin.com. “In the first flip that I did, I used a silent partner,” said Vaamonde. “He was someone who wasn’t in the real estate business, but participated as a passive investor; he provided the down payment and was a co-guarantor for what was basically a construction loan. He was repaid by sharing in the profits.”
Partner lender vs. private lender
The biggest difference between a partner lender and a private lender is that a partner will have a vested interest in the project itself. They will likely bring their own experience and ideas to the table, and will probably want a say on certain aspects of the project.
This means that if you’re brand-new to flipping houses—and want a partner investor to fund the project—you should be bringing some other value to the table. This might mean construction experience, a helpful network or the willingness to head up the actual renovation.
Use existing home equity
Don’t have liquid funds to put down on a house flip or prefer to keep your cash available, just in case? Consider pulling from existing home equity that you may have in your primary house or other properties.
This equity can be utilized in a few different ways. You can:
- Complete a cash-out refinance, which allows you to withdraw a certain percentage of your property’s equity
- Pull from a home equity line of credit (HELOC)
- Use the equity in one or more of your properties to secure a hard money loan (called cross-collateralization).
Existing home equity can also be a great funding source over the course of your house flip if needed. You can utilize that equity to cover certain expenses that may arise, such as insurance, necessary utilities, legal fees and other contingencies.
Owner financing
In some cases, you may find a seller willing to finance your property purchase. This agreement, called “owner financing,” is when a seller agrees to finance the purchase for you, essentially becoming your bank or lender. You will then own the property and make payments to the seller as agreed, the same as if you’d taken out a traditional home mortgage.
With owner financing, you have the opportunity to directly negotiate with the seller on factors like the purchase price, down payment, loan term and interest rate. It also offers buyers the opportunity to bypass certain lending requirements that financial institutions may have if the owner-financier is willing.
Just be aware that owner financing isn’t very common and may be difficult to find.
Crowdfunding
Real estate crowdfunding is essentially like borrowing from many different private lenders at one time, all of whom are interested in funding your project.
Crowdfunding has become more popular in recent years, thanks to various online platforms. But while crowdfunded investing most often involves large developments and commercial property, you can also use crowdfunding to flip a house with no money out of your own pocket.
For instance, the Buy & Rehab funding option through Zeus Lending allows house flippers to borrow up to 100% of their project’s cost, up to 80% of the home’s ARV, which will be funded by various platform investors. Deals can be funded in as few as four days, and there is no prepayment penalty if you repay the loan earlier than agreed.
Other crowdfunding platforms, such as FundThatFlip.com, are willing to fund up to 65% ARV with interest rates starting at just 8.49%. You can have funds in hand in as little as seven days, as well.
Lease option
In some cases, you may be able to utilize a lease option in order to flip a house with little or no money out of pocket.
This process, also known as an option-to-buy, involves signing a lease agreement with the owner of the property. As the investor, you essentially agree to purchase the property after the lease period is over. During that time, you will make rent payments on the property, which may count as credits toward the agreed purchase price. Typically, a down payment is not required for a lease option agreement.
If the seller agrees, you may be able to make certain improvements to the property during the lease period. This means that you can renovate while only needing to pay rent, which might be very convenient if you also plan to live on-site while the project is completed.
Once the lease option period ends (or the renovations are complete), you can finalize your purchase of the home; many lenders will even accept credited rent payments in lieu of a down payment , saving you from contributing out-of-pocket funds.
Once completed, you can sell the flipped property immediately.
Are Renovations Profitable?
A well-calculated renovation is one of the surest and fastest ways to make money from property, but the trick is picking which one to buy. There’s no happy “one size fits all” approach to buying and renovating property for profit.
It requires an understanding of what style of renovation works for any given property, the correct budget to allocate, and the appropriate purchase and sale price you need to clinch in order to make money on the venture.
If you want to set yourself up financially for the future, one of the best ways you can do so is to renovate and sell homes for profit. If this is what you want to do, then you have come to the right place! Choosing the right properties to buy, knowing what renovations make the most profit, and knowing when to sell to make the maximum profit can be difficult.
It’s less of a lottery than it sounds, so here are a few basic pointers to steer you in the right direction.
1. Location, location, location
You hear it all the time, so ignore it at your peril. Purchase in the wrong suburb or in a bad location, such as right on a busy main road, and you’re risking your profit potential before you’ve even started. Your aim is always to appeal to the majority of buyers, and a major thoroughfare is always going to be a major turn-off, no matter how stunning your renovation.
Research suburbs and locations that you know will be popular with buyers and/or renters. Real estate sites and property research services such as CoreLogic can help with the ground work. Think good amenities and infrastructure, close proximity to public transport and preferably quiet locations.
2. Buy at the right price
In an overheated market, where prices are steadily escalating and competition is fierce, it’s easy to overpay on a property. Do your research and know what properties are worth in the suburbs you’re looking in. Don’t let emotion or desperation get the better of you.
It might take a couple of months to get a handle on what real estate is selling for, and the difference in price between the unrenovated and renovated versions of similar properties. The larger the gap, the greater your potential to make a profit on the renovation. If there’s little difference in price between the two, then you’re looking in the wrong suburb.
3.Tailor your renovation to the target market
A style of renovation that works for one suburb could be completely wrong for another. And a quality benchmark required for one property would be money down the drain if you broadly applied it to every property you renovated. For example, it would be silly to splurge on expensive stone benchtops for a rental property unless perhaps you were renovating a penthouse overlooking Sydney harbour.
Research who your target market is and then tailor your renovation to that market, whether it’s young families (think safety and practical play areas), singles (security) or busy couples who want a low-maintenance property (no expansive lawns or gardens to maintain).
4. The benefits of a cosmetic renovation
A structural renovation is a big investment of time and money, and will require council approval. It’s not for the faint-hearted. Sure, it can offer big profit potential because the overall investment is higher, but it also carries much higher risks. If you’re new to renovating, I advise you cut your teeth on a cosmetic renovation. It’s much more straightforward and in most cases requires no council approval.
A cosmetic renovation typically includes improvements like painting throughout, new flooring, updated lighting, new window dressings… basically modernizing everything so the property looks fresh and new again, inside and out. It can be done very cost-effectively if you shop around for materials, fixtures and fittings to get the best bargains, and negotiate good tradie rates.
5. Kitchens and bathrooms
These are the two areas where you can add huge value. Products like White Knight Tile paint and Laminate paint can transform tiles and cabinetry that are still in good nick but need a serious update. Otherwise, if you’re fully renovating your kitchen and bathroom, carefully budget the two so you don’t overcapitalize, as they can be expensive projects.
6. Set a budget and stick to it
Talking of budget, this is the most critical part of the process. There are three figures that will ultimately dictate your success or failure: your purchase price, the total cost of the renovation and the price you sell the property for.
These are the figures that any seasoned developer or professional renovator will quickly tot up in their head when they are sizing up any piece of real estate. They have done enough property deals and renovations to have a realistic idea of what things cost and the maximum they can spend to still make a decent profit.
How Much Money Can a Home Remodeling Business Make?
Your remodeling business generates income by charging your customers for labor and materials for their renovation. You are responsible for providing your own tools, as part of your trade.
However paint, hardware, lumber, flooring, and other supplies are purchased by you at wholesale prices and then you charge your customer for them at a premium price. Your hourly labor costs will be determined by level of expertise, the type of job that is being completed, and local competitive rates.
The typical markup on materials is 15%. Income for a one-man company can be around $20,000 a year working part-time while a large contractor with multiple crews can see income in the seven figure range when they complete multiple large jobs over the year.
Ensuring quality work that completely satisfies your customer is the number one means of generating more business, and therefore additional profit. You will need to ensure the quality control and customer service are always of top priority for your successful remodeling business.
When Remodeling a House Where do You Start?
Remodeling your entire home is a tall task. If you’re planning to remodel your entire home and don’t know where to start, follow these steps below.
- Determine what you can remodel yourself – and what requires a contractor.
- Determine your budget.
- Decide on the design and style of your home.
- Acquire the appropriate permits.
- Research builder’s risk insurance.
- Create a timeline and stick to it.
- Get started!
Home remodeling is daunting to say the least. Between the time that it takes out of your daily routine, the cost, and deciding what to renovate first, there’s a lot to keep track of when renovating every room in your home – not to mention the coordination it requires with interior designers, contractors, and other professionals.
But, with proper planning and preparation, your entire project can go smoothly. These steps are meant to help you start the process. They will provide you with peace of mind and prevent you from making costly mistakes in the future.
When planning a home remodel, there are too many things to keep track of – too many things to count, actually. But, you do one simple thing to effectively prepare for your home remodel.
All you need to do is create a plan.
How do I Start my Renovation?
Whether you’re planning on renovating for profit, or are aiming to transform your house into the family home of your dreams, renovating any abode is a monumental task. To help make the process easier, we’ve pulled together the ultimate renovation planning guide to start you off on the right foot.
Renovating your home, no matter how big or small, requires a serious amount of attention paid to all the details. But, if you set yourself up properly with a clear plan in mind you can definitely spare yourself some of the headache.
If you are looking to find out top 10 ways to renovate your house beautifully yet economically then read below:
Divide and Conquer
As mentioned earlier effective planning is the key to effective renovation. If you are renovating yourself then you need to focus on both the bigger picture and the smaller parts. You might have heard the phrase “whole is greater than the sum of its parts”, you can apply the same strategy to your home renovation project and devise a renovation plan for each area in your house.
If you hire an architect for renovation, he will assess your requirements and then renovate accordingly. In this case since you’re in charge, you will brainstorm your requirements, write your end goal for each space in the house and decide the overall goal.
Budgeting
Since you want to renovate your house economically it is important for you to decide the total expenditure requirements/limit. It is important to remember in budgeting that you cannot overestimate your budget, keep your budget underestimated and then move on to researching for things you need.
Research
You will be surprised at the number of options you have once you start your research. The beautiful lamp that you liked at a high end store can be purchased at a lower price from elsewhere as well.
So, when renovating your house on budget please remember that if you research to find the furniture you like, paint you want or the decorations you would like in your house, you are likely to find most of the supplies at an inexpensive price. Take advantage of online shopping, thrift stores and second hand furniture shops and see how far you will go.
Doors Create the First Impression
The first impression of your house is your door. If you are unable to change the door completely and if your existing door is in a good condition then you should repaint your door.
Your doors could also affect the lighting of your room, and you could benefit from this great technique interior designed Amy Lau uses, “When dealing with a dark room, whatever color is used on the walls, I paint the ceiling, trim, and doors the same color but 50 percent lighter. Too much of one shade can overpower a space.”
So, when renovating on a budget if you are repainting your door try to use different shades according to the concentration of light in your house to optimize the lighting of your house the way you want to.
Paint Affects Lighting
As mentioned earlier painting affects lighting and when renovating your house you might opt for a new paint. In that case if you are already on a budget purchasing different colored pallets might seem counterintuitive. If you are on a tight budget then opt for a black and white palette, it will give your house a modern sophisticated look and you will have the guarantee that you can never go wrong with white or black.
Small Rooms don’t have to Look Small
If you are renovating to make a small house look bigger than an inexpensive and beautiful way of achieving that goal is to use mirrors. It’s an inexpensive technique but it’s used by one of the most famous architects of his time, Sir John Soane, who used mirrors in the breakfast room of his London house.
Kitchens and Storage
If you are decorating/renovating your house then you are probably trying to de-clutter and maximize your storage as well. Utilizing your kitchen to its maximum capacity can help you minimize your storage problems. In order to do this on a low budget you can either DIY kitchen cabinets or storages from recycled material at your house, or take advantage of thrift shops in your area.
No one knows your kitchen space better than you do and your storage needs building DIY storage kitchen cabinets will not only help you save money and reuse old materials at your house but it will also ensure that you’re building exactly what you need. If you already have cabinets which are enough for storage then you don’t need to replace them you can just repaint them to make your kitchen look as good as new.
Light Comes through the Windows
According to Marc Appleton, “half the experience of living indoors is seeing the outdoors” So when remodeling your house install large windows. However, you might not have the budget to change your windows in that case play around with paint and paint your windows a shade lighter than the rest of the room to maximize the light coming through the windows.
Bathroom Renovation
You would be surprised at the number of inexpensive yet quality products you can purchase to renovate your bathroom. If you are looking to install new toilet fixture you can check out Toto Toilet, and if you are not planning to install any new items, you can fix up your existing toilet by changing the paint, changing cabinet paints and by fixing the pressure of shower etc.
Floor Renovation
If you are on a budget then floor renovation might seem expensive, and if you cannot find a flooring installation under your budget then you should invest in renovating everything else according to your floor design.
The key to renovating or redecorating your house beautifully yet inexpensively is to devise a goal for yourself, and paint an entire picture of what you want and then step by step renovate each part of your house like mentioned above.
What do I Need to Start a Home Improvement?
If a home improvement business sounds like an excellent business idea to you, you should know how to make a good start in this endeavor. Here are some tips for that purpose.
Ensure You Have the Right Motivation
Having knowledge of the basics of the business and crafting the right business plan are two essential aspects to make this endeavor a success. Aside from the two, you should also have the right motivation, especially when you’re just starting.
Motivation creates the will needed to get things done. It’s also the thing that makes you enjoy your work and be hands-on with your business. That’s why you should ask yourself if this kind of business is the thing that you want to do.
Have a Reasonable Financial Outlook
You should make sure that you have enough financial savings set aside to cover the expenses of starting your business. Also, you should keep in mind to avoid overspending. If you don’t have a reasonable financial outlook, this business may not be for you.
Being a contractor of home improvement services needs you to tighten your belt for several months or even a year in order to drive in profits and become successful.
Determine the Services You’re Going to Offer
It’s essential that your business offer services that you enjoy doing and give you the best profit as possible. For sure, you already have things in mind. Some contractors offer all-around home remodeling services. While others focus on a particular room like the dining area, kitchen, living room, and bedroom improvement.
Get a License and Insurance for Your Business
Having a license and insurance is crucial before you start your business. For instance, you should obtain a contractor’s license and other vital certifications. Aside from the contractor’s license, getting a business license in the city where your business is located is also a must.
You also need to get general liability insurance to cover such expenses in case of accidents in the job site or home damages done by your employee. Commercial and cyber breach insurance is also essential for this kind of business.
Be Friends with Suppliers and Subcontractors
When doing business, it’s crucial that you start a business relationship with home material suppliers. In this way, you can obtain discounts and reduce your business expenses. You can also get your work done on time because your supplier will prioritize you when it comes to the delivery of materials.
Market Your Services
Your business will need excellent marketing so that people will know and avail of the services you offer. Marketing is among the things that you should do in the first few months of your business.
You can hand out flyers, put up billboards, or use the internet to make your business known. The best way to market today is putting your brand on Craigslist. Using online marketing will get you more leads and boost your profits.
What is a Buy to Sell Mortgage?
A buy to sell mortgage is often called a ‘bridging loan‘. It is a short-term finance arrangement designed to be used for purchasing a property that you intend to sell for profit. In this way, it is different from a mortgage for buying a second home, or a BTL (buy to let) mortgage.
The sale is usually made after renovating the property. With standard mortgages, the contract terms are usually longer than you would need to quickly sell a property. Buy to sell mortgages are usually paid back in months rather than years.
Why Flipping Houses is a Bad Idea?
House flipping is stressful, especially if you don’t have a solid plan in place. Here are some of the biggest drawbacks to flipping houses.
It Can Be Expensive
Many people get into house flipping because they believe it’s less expensive than other investment opportunities—there’s the chance that you can buy a cheap house, do all the repairs yourself, and sell it for a massive profit, right? Unfortunately, as many novice house flippers learn the hard way, there are many more costs to factor in before you see any potential profits.
For example, even if you do the renovations yourself (which I’ll get into later), you still need to pay for materials, tools, and any required permits. You may also need to pay financing fees if you purchased your property with a loan, and most short-term real estate lenders charge steep interest fees.
Then, for the duration of time that you’re holding the property (while you’re performing renovations, and then while the house sits on the market) you also need to pay for homeowners insurance, utilities, and property taxes.
Selling the house also comes with additional costs. You’ll likely need to pay a real estate agent’s commission for listing, showing, and selling the house, unless you choose to do all of it yourself. If you go DIY, you’ll need to pay for marketing materials (like signs, flyers, or business cards), listing fees, and open-house expenses.
By the time you complete your first flip, you’re likely to find that all these extra costs add up to a much larger expense than you expected. That’s why it’s important to make a realistic budget based on real-world experiences, either by researching house flipping costs yourself or consulting with a veteran real estate investor.
It Can Be Time Consuming
If your only house flipping experience comes from watching HGTV, you may not realize just how long it actually takes before that beautiful “after” picture can appear. Just finding and purchasing the right property can take months. Then, you need to renovate the house, either on your own or with a contractor.
Using a professional will speed the process up, but the cost will quickly eat into your budget, so many house flippers try to do everything themselves as quickly as they possibly can. Next, you need to schedule inspections to make sure your renovations are up to code—and if any problems are found, you’ll need to spend even more time (and money!) fixing them. Last, the process of selling the property can often take much longer than rookie house flippers expect.
It’s also important to understand that almost none of this time will be spent idle. If you’re hoping to flip houses on the side while keeping a full-time job, you’re likely to spend all of your free time working on the property. In addition to time spent actively renovating the house, you also have to factor in commuting time—to the property itself, and to meetings with real estate agents and potential buyers—as well as the hours you’ll spend showing the property and preparing for open houses.
If you don’t have enough time to dedicate to the flip, then you’ll end up needing to carry the property for much longer, and every extra month means more payments to lenders and utility companies. Flipping houses is a bad idea if you can’t devote a significant amount of time to completing the project.
It Can Be Hard Work
While it’s possible to flip a house that only needs minimal repairs or touch-ups, the real money is in purchasing and renovating distressed properties and selling them for a steep profit. This means you’ll need to do a lot of physical, manual work fixing up your flip.
While it’s possible to hire professionals to do all of your major repairs, doing so will significantly decrease your profits, which is why most veteran flippers only use professionals for things that require licenses or special training, like electrical and HVAC work.
When you’re flipping a house, you’ll likely need to know how to do things like lay carpet, install sinks and toilets, and hang drywall, for example. That’s why it’s common to see professionals like carpenters, plumbers, and roofers flipping houses on the side for extra cash.
If you don’t have any experience with this kind of manual labor, and you don’t have any connections in the industry to help you get a good deal on professional contractors, then flipping houses may be a bad idea for you.
It Can Be Competitive
Back before reality television brought house flipping into the cultural zeitgeist, the competition for investment properties was relatively low. If you were smart and knew where to look, you could easily find undervalued homes in good neighborhoods and snatch them up before anyone else caught on.
Now, however, you’ll likely face steep competition for every decent investment property in your market. And it’s not just fellow small-time flippers, either—big names like Zillow have started flipping houses in select markets, with enough resources to find and buy all the best deals before independent investors even have a chance to bid.
Plus, once you’ve found and renovated a property, you’ll need to sell in a market that may be saturated with other flips. And since so many big investors are competing on the market with you, they’ll probably have much higher marketing budgets, making it more difficult for potential buyers to find your listing among the competition’s flashy ads. In order to stay competitive in the house flipping market now, you’ll need a solid plan for finding leads and marketing to the right people.
What is a Good Profit to Make on Selling a House?
Home seller profits reached record highs in 2020. According to new data, the average seller netted a whopping $68,843 last year — up $15,000 from 2019 and $20,000 from the year before.
The average return on investment jumped, too, clocking in at almost 35% per property. Again, it’s a notable jump from prior years (29% in 2019 and 27% in 2018).
The trend toward higher profits was hardly localized. In fact, seller profits rose in over 90% of all housing markets, according to ATTOM’s data.
Seller ROIs were highest in:
- San Jose, California (87.3% ROI)
- Seattle (72.1%)
- Salem, Oregon (69.6%)
- Spokane, Washington (69.2%)
- San Francisco (68.2%)
The biggest annual increases in ROI were seen in:
- Mobile and Birmingham, Alabama
- Augusta, Georgia
- Hartford, Connecticut
- Cleveland
- Rochester, New York
- St. Louis
How Much Does a House Flip Cost?
Here is an example where we isolate the cost of financing a fix and flip project and compare three financing methods. These numbers do not represent the total cost of the project (such as other carrying costs, etc.).
Example of Financing Costs for a Fix & Flip Project
| All Cash | Hard Money Loan | Homestyle Renovation Loan | |
|---|---|---|---|
| Purchase Price | $100,000 | $100,000 | $100,000 |
| Rehab Costs | $20,000 | $20,000 | $20,000 |
| Down Payment | $100,000 | $24,000 | $12,000 |
| Amount Financed | $0 | $96,000 | $108,000 |
| Interest Rate | 0% | 12% | 5% |
| Financing Related Closing Costs | $0 | $2,880 | $3,996 |
| Mortgage Payment | $0 | $960.00 | $998.88 |
| Out of Pocket Rehab Costs | $20,000 | $0 | $0 |
| Total Costs for First 30 Days | $120,000.00 | $123,840.00 | $124,994.88 |
As you can see from the example, a lender may charge points and a higher-than-market interest rate to finance a flip. But financing allows you to buy a property that you may not have had enough cash to purchase. Additionally, financing can enable you to have multiple flip projects going on at once after you get the hang of fixing and flipping properties.
The cost to flip a house equals the sum of the acquisition cost, repair costs, carrying costs, marketing costs, and sales costs. Costs vary based on where the home is located, property type, and the extent of the renovations needed, but the total cost to flip a house is usually around 10% of the purchase price.
What’s The Difference Between a Renovation And a Remodel?
The words “renovate” and “remodel” are often used interchangeably when it comes to real estate, contracting, and interior design. However, for professionals working in one or more of these industries, these terms actually entail two very different things. Essentially, the difference between them is that a renovation refers to restoring something to a previous state, while a remodel refers to creating something new.
To quote from the dictionary:
The definition of “renovate”:
Save
- To restore to good condition; make new or as if new again; repair
- To invigorate; refresh; REVIVE
The definition of “remodel”:
- To alter the structure of: REMAKE
As you can see, the differences between the two are pretty clear, at least from an everyday perspective. But what do these differences mean when it comes to real estate and home maintenance? Read on to find out with this updated guide from our experts!
Residential Renovation: What’s it Really Mean?
As you can see, in the broadest sense, “renovate” means to make new again—to revive. When you apply this definition to the world of home construction, “reviving” could mean anything from repainting and refacing cabinets to installing new light fixtures to adding other finishes and fixtures. Regardless of the task at hand, the original design is never dramatically altered. Rather, it is simply updated or tweaked to meet a new or revised standard.
For example, a custom renovation not only makes a room more attractive, but it also adds a welcoming sense of personalization. Renovating your kitchen makes it feel more personalized to your lifestyle, giving it a comfortable and homely ambiance.
Meanwhile, smaller and less-expensive renovations like changing a room’s color or replacing old windows before putting your house in the market will greatly increase the chance of a successful re-sale while also delivering a very nice return-on-investment.
What About Residential Remodeling?
Now, take a moment to revisit the dictionary’s definition of “remodel,” which is “to alter the structure of.” As opposed to renovations that are “revivals” of previous state, remodeling a room is more of a complete “remake.”
So, whenever you take on a project that completely transforms the layout, structure, and style of a room, you are remodeling it. In other words, you’re definitively changing the look and layout of its space, not merely updating or tweaking it. Likewise, if you want to do something like reconfiguring a household floor plan, you’re also remodeling!
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For instance, you may decide to combine your kitchen with your living room to create a more contemporary and open-concept layout. If you do, then you’re planning a remodel, not a renovation! Similarly, if you’d like to install a kitchen island to create more functional cooking space, you’re also remodeling a room.
Essentially, if the project involves a drastic alteration of a space that breathes new life into it while giving off a whole new look and feel, you can bet that it’s a remodel—not a renovation!
Which Costs More: Remodeling or Renovating?
A remodeling project will almost always cost more than a renovating one. That’s because remodeling typically involves much more complex design considerations, as well as numerous construction, electric, and plumbing expenses.
Also, if you’re in the Boston area, it’s important to know how the costs for both renovations and remodels will very likely be much higher than other areas of the U.S. Because of this, it’s important for you to consult an experienced design-build contractor or architect before getting too involved with your project. After all, if you’re seriously interested in renovating or remodeling a room, it definitely pays to make sure your project gets done right the first time.
