When you want to renovate a house, time is often of the essence. For investors who are planning to flip a property rather than holding on to it, how fast you can rehab it will play a significant role when deciding whether or not to buy the building. In order to avoid losing money, you must be able to finish remodeling fast enough to avoid paying as much holding fees (property taxes, HOA fees, etc.) as possible.

However, answering the question: “how long does it take to renovate a house?” is far from straightforward. It can take from a few weeks to many months. As it is often the case with real estate, it will vastly vary depending on your circumstances, such as the type of property you are considering renovating, the work to be done, your knowledge of the subject, where you are located, etc.

Here are some of the things you should take into consideration when you are planning to renovate a building.

What is the scope of work?

How long renovation will take varies based on the scope of work to be done. Obviously, if the house is very big and needs extensive repairs, it will take longer than a small house which is slightly outdated. 

Each type of project to be done has a different timeline. However, those figures are only estimates. Each project will also take more or less time, depending on what kind of material you are planning to use. If you decide on a rare type of wood for the flooring, which may be difficult to source and lead to additional delays, should anything arise.

You will also need to take into consideration how much of the original structure you are planning to reuse. Although generally, it is best to remodel what is already there, in some cases, it is more time -effective to start from scratch.

The best policy is always to be conservative in your approach. Home renovation projects rarely, if ever, take as little time as one would hope. Make sure you have some flexibility in your timeline before starting a major renovation project.

Who will renovate the house?

Investors often play with the idea of completing some, if not most, of the renovation project themselves. However, unless you have a significant amount of resources and knowledge – if you are a contractor yourself, for example – the best policy is to hire someone. It will save you a significant amount of time and money in the long run.

The right contractor will make sure that the project is running smoothly and will keep you updated regarding the timeline of the renovations. Here are some factors to take into consideration when hiring a contractor:

• How big is the crew?
• Do they work alone or with subcontractors?
• How familiar are they with that kind of renovation? Do they have preferred vendors for some of the items needed in the renovation (cabinet, tiles, etc.)?
• How many projects are they working on at once?
• How often will they be on-site?
• Will the weather be a factor in that particular renovation project?

Everyone loves a good bargain. The truth is, homes are expensive. Just like people look for deals on retail products like jackets and flat screens, people love saving money on houses. One of the quickest ways to score a great deal on a home purchase is by taking advantage of the foreclosure market. Investing in real estate can be very rewarding, especially when you can land a huge discount on your investment. Purchasing a foreclosed home is a much easier process than buying a home from a regular seller. If you’re looking for a quick buy, you’ll definitely want to look at foreclosed homes.

What is a foreclosure sale

Foreclosure occurs when a  homeowner fails to make payments on their house. Foreclosure is a legal process whereby the owner of the home forfeits the legal rights to the home. Once an owner has defaulted on their payments the lender then takes control of the home and attempts to gain back as much as possible. From there the home goes to a foreclosure auction. If it does not sell at auction, then the lending institution takes ownership of it and it becomes a real estate owned property, or an REO. In that scenario the home may be listed on an MLS or multiple listing services. As a result of the  need to sell the home being foreclosed, the lender will list the price the house for a lot less than it is actually worth. This is where buyers can score big savings. For homes being sold at auction, the lender typically opens the bid at whatever is remaining on the loan. 

Find a broker and get pre-approved

Like with any home purchase, the very first thing you’ll want to do is get pre-approved by a lender. Once that is done, begin the process of searching for a broker who deals directly with banks that sell foreclosed homes. Another tip is to search online databases of foreclosed homes. Look at local real estate listings too as often there are filters that allow you to see only foreclosed homes. Look for the letters REO as that indicates a property that is under the ownership of a bank. Sites such as Hubzu is a good tool for finding foreclosed properties and posts current online auctions.

Find an agent experienced in foreclosed homes

Another way that foreclosure sales are easier is that they typically only require one agent during the process. Be prepared to move quickly as foreclosure sales move at a very fast pace. When looking for an agent to represent you during this process, look for the designations; Certified Distressed Property Expert (CDPE) and Short Sales and Foreclosure Resources (SSFR). It is possible to skip this step and work directly with a broker in order to save commission fees. Banks hire their own brokers to deal specifically with REO properties. However, most buyers feel more comfortable when they have an agent directly working on their behalf. 

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Look at comps before making an effort

Before making any offers make sure to have your agent run a comparative market analysis. This helps you understand the recent sale prices of comparable properties, or ‘comps.’ When doing a CMA, your agent will typically look through the last 180 days and looks for factors such as the pace of home sales and tax assessment history. 

If foreclosed homes in your area are selling quickly, be prepared to make the higher bid, remember, the price is likely already discounted. There’s no real way to tell what the bank’s bottom line will be, but usually foreclosure sales go very quickly. Remember, foreclosure prices are usually already discounted, weighing in significantly less than the actual value, so an offer that is too low may be seen as a non-started by the bank. 

Get an inspection and find someone to help with repairs

With foreclosure homes, there’s a good chance that you will have to do some repairs. In a foreclosure sale, the buyer pays for any and all repairs. Since the home is owned by the bank in this case, there is no other party to do the repairs. Foreclosures homes are sold ‘as is.’ You will definitely want a thorough inspection of the house to know exactly what you’re buying. The bank does not make any guarantees regarding the condition of a foreclosed home. 

Risk of buying a foreclosed homes at auction

One benefit to buying a house at a foreclosure auction is that there usually aren’t many bidders. With less people competing, the better your chances are of getting a great deal on the house. A downside to buying at a foreclosure auction is that in many cases the bank requires cash payments. Sometimes you may need to have the cash on hand before you even make a bid. Another downside is that there are no inspections for homes that go on auction. Almost all auctions require some form of earnest payment up front and often they are non-refundable. 

Getting a great deal buying foreclosed homes

As previously noted, if the foreclosed home does not sell at auction, it then becomes an REO property. This is where people can get big savings on a home (provided they understand it will likely need lots of repairs). The main reason why REOs are priced lower than regular listings is because they often need work, typically so much so that they don’t qualify for financing. That alone clears out 75% of potential buyers which again, lowers the price. This is where an investor can swoop in and purchase a home way below the market rate and the home’s actual value.

Making an offer

Once you have worked with your agent to find a foreclosure home to buy, the next step is to make an offer. This process is similar making an offer on regular listings but involves more paperwork. When making an offer keep in mind that banks have a few requirements. First, you’ll need a pre-qualification latter before they even consider an offer from you. In many cases you’ll also be required to submit a copy of your earnest money check. Sometimes the check will need to be certified funds.

Note that while banks typically want to unload foreclosed homes quickly, that does not mean that you should make a low offer or expect them to take anything. The price will already be discounted and like any regular seller, the bank will want to get as much money as possible. Like with any sale, the amount below the listed price that the bank will take depends on things such as how long it has been on the market.

Conclusion

When done right, buying foreclosed homes can be an enormously rewarding investment. All real estate investments take time and effort. Foreclosed homes are a great way to find properties at discounted prices. This can be an especially fruitful market for people looking to do flips. As a note to fix and flippers, though your investment may be less, you may still have to do a lot of repairs, so be prepared to invest a little more into the fix before the flip. Each state has their own laws about foreclosure sales and the process can be very tricky.

There are many ways to invest in real estate. Two of the most popular ones are to either fix and flip a house or, on the contrary, to hold on to it. Although they both involve the same initial step – purchasing a property, often in need of some serious rehab – the following strategy is entirely opposite. While flippers try to sell the house they bought as quickly as possible, buy-and-hold investors intend to keep the building for at least several years.

The way each investment property generates a revenue is different, but which one is the best strategy?

Pros and cons of flipping a house

A house flip consists of purchasing a distressed property below market value, improving it, and selling it for a profit as rapidly as possible. The goal of the flipper is to avoid paying the carrying costs – such as property taxes, maintenance, HOA fees, utilities, etc. – as much as possible.

The most significant advantage of a fix and flip is that you should be able to make a profit relatively quickly, at least in theory. Your money isn’t tied up in a deal for very long, and you can be more flexible. If you can do part of the renovation work yourself, it is also an excellent way to save some money on contractor fees.

On the downside, as anyone who has ever taken part in a construction project can tell you, things rarely go as planned. Things often take a lot longer and are costlier than desired. Besides, there is always a risk that the house does not sell for as much, and as quickly as you would have hoped. Finally, by holding the property for such a short time, any profits you make on the resale can be subject to a hefty capital gains tax. There are many mistakes that can turn a flip into a flop.

Pros and cons of buying and holding a house

When you buy and hold a home, the goal is to rent the property in the long term in order to generate a steady monthly revenue instead of a one-time profit. In the long run, the asset also appreciates, creating even more benefit when comes the time to sell it.

The most interesting side of holding on to a building is that it creates reliable cash flow in the long term. It can be used to offset the building expenses, including the mortgage, maintenance, taxes, and so on, but also to finance the investors’ personal needs. On the long term, you can also use the equity in the building to fund other projects. Unlike a house flip, which is often a time-intensive project, a well-managed building is a good fit for part-time investors.

However, being a landlord comes with its own set of headaches. You are responsible for the upkeep of the building, whether all units are occupied (and the profits optimal) or not. A few bad tenants can also rapidly bring the value of the property down, not mentioning incurring the possibility of a lawsuit.

Should you flip or buy-and-hold a property?

There is no absolute right or wrong answer. Whether you should opt for a short or long term strategy depends on the building you are considering as well as your cash flow needs.

Flipping houses can be a lucrative business endeavor and one of the best investments that you can make  — but did you know it can also affect your credit score? If you’re wondering why it affects your credit, keep reading as we explain all that you need to know. 

How Should You Finance Your Flip?

Undoubtedly, the best way to finance almost any home purchase is to buy it outright in cash. Not only will you save interest that you would otherwise have to pay to a lender, but you will also save yourself the cost of an appraisal, as well as other closing costs such as a loan origination fee. 

Of course, not everyone has the cash to buy a flip home outright, and sometimes you have no choice but to finance your flip through a lender. It is crucial in this case that you do your due diligence and shop around for the best deal. There are loan products available on the market specifically for flip projects; however, whether they will work for you depends on your individual situation. Sit down with a trusted financial advisor or mortgage lender and seek advice if you aren’t sure what your best option is.

Do You Need Good Credit to flip a house?

Not necessarily, although it helps! If you plan to use a conventional bank to finance your flip, it will be extremely difficult without a solid and established credit history. Banks require you to be a ‘low-risk’ borrower in order to offer you the lowest interest rates, and therefore, a less than excellent credit score could hinder your ability to gain an affordable loan. 

There are home loan products specifically geared towards borrowers with low credit scores; however, they often have high-interest rates and are usually only suitable if you plan to flip and sell the property very quickly.

How Can Flipping A Home Affect Your Credit Score?

Flipping a home involves various costs and can often go over budget. If for whatever reason you fall behind on your loan repayments while renovating the property, your credit score will be negatively impacted. This will make it more difficult to borrow again.

Likewise, if you do not have the cash to purchase your renovation materials and fun the required labor, you may opt to use a credit card. This can negatively impact your credit score as utilizing a large percentage of your available credit may deem you a risky borrower by credit agencies and lenders. Try to keep your credit utilization under 30% to not negatively impact your score.

It’s important to remember that even if you run up your credit card balances, once you have paid them off your credit score will improve with time. Keep check of your credit score regularly so that you can rectify any issues. 

The Bottom Line

If you don’t want to drop your credit score when flipping homes, it is vital that you do not incur any late payments, or run up large credit card balances. Experienced property investors will always take the time to create a budget and stick to it as closely as possible. This can help to avoid spiraling flip costs and protect your credit score. 

Flipping houses can seem like an easy way to make money, but there are several things you should avoid if you want to be successful. Here are three mistakes that new house flippers make — and how to avoid them.

They Don’t Set a Budget and Schedule

The single biggest mistake that new home flippers make is going over budget and running behind their proposed schedule. Time is money, and the longer you spend renovating a property, the more money you will also spend not only on the renovation but also on the utilities and other expenses. This will eat into your profit margin. It is important to work out a schedule before you purchase a property and consider it when presenting your offer. You should aim to stick as closely to your proposed time frame as possible and be realistic.

Likewise, the builders and contractors you hire to help you with your renovation could make or break your intended deadline. It is crucial to work with reliable contractors who understand the project and what you expect from them. Ask your real estate agent or friends and family for reliable contractor recommendations, and be sure to interview several before you make your final decision.

They Don’t Learn the Local Market

If you’re flipping houses for profit, you need to know where the most desirable neighborhoods are. This will not only ensure that you get the best resale price possible, but also that you sell the home more quickly.  Many inexperienced flippers forget that a successful flip starts with the right location. If you find a home at a good price in a sellers market, you will have to spend a lot less energy selling it for a profit than a home in an undesirable location.

Don’t fall into the trap of not researching your potential flip market. The best opportunities to make a profit are in neighborhoods that have excellent local amenities such as highly rated local schools and hospitals, as well as retail and entertainment venues.

They Don’t Target the Right Buyers

One of the biggest mistakes a new real estate flipper figure out who their target clientele is. It is crucial that when you renovate a property, you have a clear idea of who your potential buyers will be. For example, if the home has several bedrooms and a large yard, you can assume it will attract a family and therefore should have access to a good school. 

Another mistake that new investors make is not renovating the home with the potential buyer in mind. Instead of designing a unique space with lots of individuality, it is important that when flipping a home, you keep it simple. Potential buyers may find it hard to see past elaborate design features that aren’t to their taste. To sell a house quickly,  it is crucial that when viewing, people can visualize themselves living there. 

A good rule of thumb is to use a neutral color palette and clean, simple finishes so that the home appeals to the most buyers possible. When you first start designing the home, you must create a budget — and stick to it. Renovating a property with luxury materials is not necessary unless the house is a luxury property and you are confident that you can recoup your investment when it comes time to sell a home. 

Flipping homes is a business and should be treated accordingly. Rookie real estate investors often focus too much on the details and fail to look at the bigger picture of their investment. Although it is impossible to eliminate investment and renovation risks entirely, you can reduce them by thoroughly researching the local market and treating each decision like an intelligent businessperson.