What To Do After Finishing A Successful FlipBy Paul Esajian on April 5, 2019
Completing a successful fix and flip rehab deal is hard.
There are plenty of moving parts and potential obstacles every step of the way. Even when the work is done, you need to find the right buyer and wait for the sale to close. When everything is finished it is a tremendous weight off your shoulders and there is a natural feeling of relief. However, what you don’t see on your favorite home flipping show are the steps needed after the flip is completed. What you do with your profits and how you handle your team is essential in building your business. Anyone can close one rehab deal, but if you want to make a business out of it you need to think about your post rehab actions. Here are five things you need to do after finishing a successful flip.
Handle Profit: The goal of any rehab deal is to generate profits. This isn’t exactly earth-shattering news, but it does get lost on investors from time to time. If things go the way you planned, you should receive a nice check at the closing table. From there, you need to be savvy in what you do with it. Closing a big rehab can almost feel like hitting the lottery. You have tens of thousands of dollars that you didn’t have just a few days ago. However, you need to be disciplined and smart in how you spend it. There will be the natural urge to treat yourself to something nice. Hey, you worked hard for this money, right? As you will see, after distributing the profits you will not be left with as much as you may think. Your closing check is like having months’ worth of paychecks at once. Instead of blowing through your profits on expenses you will soon regret, you need to be smart with your money and spend it wisely.
Take Care Of Team: Most contractors and laborers expect to be paid as soon as their work is completed. If you have worked with your team in the past they may agree to accept payment after the rehab is completed. However you agree to pay it is essential that you do so in a timely manner. If not, all the favors you beg for will quickly be discarded. Furthermore, you will get a reputation as someone who doesn’t pay for work when it is completed. Word will quickly travel through the community and you may have a hard time finding people to work on your projects. You made your money, now it is time for your team to get theirs. The longer you make them wait to get paid, the less motivated they will be to work hard for you in the future. You have the funds, so there is really no excuse not to take care of your team without making them wait.
Review Debt: The biggest reason people stay in debt is by not paying it down when they have the capital to do so. When you get a large check at closing it is hard spending it in the right places. Think about how you used debt to acquire or improve the property. At a minimum, you need to pay that debt off before doing anything else. If not, you will take on too much debt and your business will quickly sink. It is tempting to use your newfound capital on personal expenses but keep business and personal funds separate. The interest on debt makes it difficult to ever pay it off making the minimum payments alone. When you have money from closing it is the perfect time to take a large chunk out of it. You may not have much left over after paying your team and paying down debt but if you are disciplined it will be worth it.
Find Next Deal: Your ideal business should work as one big cycle of generating new leads, getting deals to contract, rehabbing new properties and getting those to closing. When you do get a new rehab deal you can’t completely forget about this cycle. If you do you there will be large gaps between closing checks. Finding your next deal shouldn’t start when your current rehab closes. You should spend some time everyday working on lead generation and business marketing. Your time may be spread thin, but this is how the investing business should operate. The longer you wait to find a new deal, the bigger gap you will have between deals.
Solidify Relationship: On every rehab deal there are a handful of valuable contacts and relationships that should be cemented. Start by thinking where the lead for the deal came from. Hopefully you reached out to them as soon as the lead contacted you but even so you need to call them again after the closing. Thank them for the deal and ask to treat them to lunch or even happy hour drinks. They will be very appreciative that you thought of them and more likely to consider you in the future. Next, move on to your real estate agent, listing agent, mortgage broker and attorneys. Everyone that worked on the deal, on both sides, should get a phone call and email. Finally, thank your rehab team for a job well done. Your contractor, painter, electrician and plumber made money on the property, but they also contributed to your success as well. An appreciative phone call or text will keep them hungry and motivated to work hard for you on the next project.
The actions you take after a rehab is completed help shape your business and your overall financial picture. Don’t discount just how important these key steps are.