Good Answer: Erik Bildman Shares His Fix-and-Flip Tips
Sensationalized shows oversimplify the complexity of fix-and-flip projects. Heed these words of wisdom from an experienced real estate professional to help your next flip succeed.
Erik Bildman is a seasoned veteran in the real estate space. From fix-and-flip projects to driving growth and performance across Sundae’s existing markets, Erik plays a pivotal role in business operations. During his time in leadership at Sundae, he’s driven expansion efforts to include 23 markets (as of February 2022) and growing!
Throughout his blossoming career, he’s been involved in the acquisition, renovation, and resale of more than 5,000 properties. Erik’s track record of effectively managing real estate projects comes with a multitude of wisdom. In this article, you’ll get the luxury of learning from someone who’s traversed the fix-and-flip landscape many times. Here’s what you need to know to tackle your next flip project.
What is the best way to get started on a flip?
At the beginning of your real estate investment journey, you don’t know what you don’t know. Before you jump in, it’s important for you to conduct research and understand the main features of a flip. Three tips Erik had for new investors highlighted what to pay attention to as you get started.
You need to have a good understanding of the area you’re investing in and key factors that impact property values there. That also means pulling comps on recently sold homes to see what your competition does and to get a feel for how much a house sells for.
Keep the end in mind
Erik emphasized that you need to understand the property and what you’re trying to achieve. As you go into a flip, that means refining your strategy and having an end product in mind. He stated that “there will always be a point of diminishing returns on a property, so come up with a game plan to maximize your bottom line.” That means knowing where to spend and where to save.
Pay close attention to the major systems
Major systems include things such as HVAC, the roof, along with other systems that keep a house operating. It’s important to get all of the major systems inspected up front to get an understanding of all big ticket items that might impact resale. The reason is simple: “no matter how cosmetically appealing your home is, those all have to be in order to ensure a smooth sale.”
What are the key upgrades to boost after repair value on a fix-and-flip?
Before going into any deal, it’s important to calculate the after repair value (ARV) of a home. As mentioned before, major system updates are crucial to the resale value of a property.
Once you’ve addressed major systems, the next most important upgrades relate to curb appeal. Erik stated that your “house has to be the best one on the block. Never overlook the first impression and the curb appeal.” That includes exterior paint, landscaping, and even enhancing the outdoor living spaces.
Further elaborating on ARV upgrades, he mentioned kitchens, primary suites, and the floor plan. With work from home becoming commonplace and more time spent at home in general you want to have“free flowing floor plans and a dedicated area for study.” Look for opportunities to add value by creating these spaces.
How do you find good contractors?
The best recommendations always come from people that you know and trust. When searching for good contractors, the same concept applies. Always start with referrals: “consult with friends, family, and real estate agents that have used a reliable licensed contractor for their remodels.” Using referrals is also a great way to help create repeat business for contractors who prefer to build long term relationships and stay busy all the time.
If you’re new to an area or don’t have any referrals here are some other options: “Look at Thumbtack and Angie’s List for contractors with positive reviews. It’s also good to drive your neighborhood, finding a contractor that already has work is a good sign. Plus if he’s in your area already there’s a good chance they’d be willing to take on more work nearby.”
Regardless of where you find your contractor, don’t skip out on references. Be sure to treat it like a business. Otherwise, you risk getting into financial trouble in an instance where the contractor takes money without doing any work. Erik further emphasized this “I would always ask for references and examples of the work they have done. Before and after pictures as well as the bids associated with those projects. You need to be diligent before you let a contractor swing a hammer.” And, of course, make sure that they’re licensed!
What’s the“velocity”metric in the fix-and-flip industry?
Time is money during any fix-and-flip project. Longer than anticipated hold times incur additional costs and also means that the money isn’t being put to work on another project.
Erik recommends that you use something called a “velocity” metric to measure renovation speed. He continued by saying “ we expect our contractors to get $1000 of work done per business day. So if his scope is $20,000 we expect his work to be done in 4 weeks.” You can quickly spot a newbie contractor or potential problem if they don’t share the same views.
How much communication with your general contractor is too much?
When it comes to working with contractors, always over communicate. The last thing that you want is something done wrong that will have to be done twice. Great communication increases your odds that things go smoothly from start to finish.
On this point, Erik said to “never let them assume that they know what you want. At early stages with a new contractor, show up to the job daily and set expectations. You also want to treat your contractor like a partner in the deal. The more respect you have with them the more they will answer to your demands.”
Great relationships with contractors can set you up for success as a fix-and-flip investor. Treat them like a partner and give them repeat business.
What are some red flags?
Before entering into an agreement with a contractor, vet them in every way possible. There are ways to do this informally in addition to checking references and seeing before and after pictures. Looking for common red flags is a great way to achieve this:
“If bids aren’t detailed at all, that’s a bad sign. You need to know exactly what you’re paying them for and how you’ll be paying them.” Erik continued by talking about expectation setting. They need to have a clear understanding of what’s needed upfront so that there are no surprises somewhere down the line.
Find your next fix-and-flip
A common pain point among flippers and real estate investors in general is finding deals. Right now, properties are in high demand and in low supply. Sourcing a lead that fits your buy box can be incredibly time consuming and require a variety of options from wholesalers to the Multiple Listing Service (MLS).
Sundae’s Marketplace is a one-stop-shop for off-market deals across the country. With a constant flow of leads, you’ll be able to save time and work on other areas of your business.