1. Do The Math BEFORE You Do The Deal

You absolutely must perform your due diligence when it comes to your purchase agreement. Check the comps (comparable homes) with more than one source. If you are working with a real estate agent, remember that while they have a code of ethics to live up to, they also have a vested interest in your purchase; so make sure to get accurate comps from other sources as well. I have seen wide variances in comps, especially in markets which have had high appreciation in recent years. Right now in Sacramento, for instance, many investors bought up homes like wildfire only to find the comps over $150,000 less than just 1 year ago! Over 15,000 homes for sale in the region and only a small fraction of that sold last month...what a nightmare for the seller! With the changes in today's market you don't want to get stuck with a home that is worth much less than you thought.

2. Don't Fall In Love

Treat fixing and flipping a house as a business and don't get too attached. You will spend less money and make better decisions when you are not emotionally involved with the details of a house. When it comes time to crunch the numbers, it doesn't matter if you love it or not. It doesn't even matter if you have the satisfaction of transforming a dump into a dream house; this is not your house and you shouldn't fix it like it's yours. I have heard so many new investors say they would only put the things that they would want in their own home. This is a tragic mistake that will over time, cost them big bucks. Get the highest quality your budget will allow but keep within your budget or you'll wonder what happened at the end of the deal. Remember that you are investing to make money. While there is a sense of satisfaction once a remodel is complete, if you don't make any money, or worse yet, lose money, all of your time and effort will be wasted. Not completely wasted because the learning experience is worth something, but we're not in this just for the learning experience. The whole point is to build your wealth through smart real estate investments, and the last thing you want to do is pay somebody to buy your house.

3. Another Pair Of Eyes

If you are creating your own plans for kitchens or other areas of construction, always have another pair of eyes view the plans with you onsite. This could be a business partner or friend, your contractor, or the vendor who is helping you with the particular area concerned. This could save thousands in fixing mistakes from wrong measurements or other flaws in a plan. The old contractor's adage rings true here, measure twice, cut once. Once a mistake is made, it's made and can be very costly to fix. Many times the repairs can involve several other trades.

4. Have a Life

Before taking on a project, large or small, evaluate your schedule, your time away from family and other responsibilities such as jobs, kid's activities, etc. This is critical to the success of your project and your sanity. Depending on the scope of work required and whether you planned to do most of the work yourself (or hire out), you will have an obligation to this project and need to stay on top of progress for profitability. Set a timeline that is realistic but monitor it on a regular basis. This is minding your business. Make the most of your time when you are out at the property. Get into good time management habits and make as few back and forth trips as possible. Having a life (jobs, kids, relationships, etc.) is one of the most important reasons that I suggest hiring out most, if not all, of the project. It brings balance back into your life. Overseeing is much different than doing all of the work and is much easier too. Just know that your family will thank you and so will your back.

5. Work with the right people

If you are using contractors, I HIGHLY suggest you get many quotes (more on this later). This process, while very time consuming, can give you great project ideas, time saving tips and reveal many cost saving plans. Ask lots of questions and make sure contractors are licensed and reputable. The worst thing that you could do is to hire an incompetent contractor who screws things up that you cannot fix yourself. Certainly, when it comes to items that will have to be inspected by the city, make sure they're done by someone other than the rookie contractor. I don't like to use side job labor for these either. In my opinion, it pays to spend more for the security of being able to go back to the business if/when something goes wrong. They should guarantee their work and if they don't, move on to another who will. One of the things you'll learn in dealing with contractors is that not all, but safe to say many, are flakey and unreliable. Don't rely too heavily on one. Get a Plan B or even a Plan C in place.

Getting many quotes initially will help in this process. If Plan A Contractor doesn't work out just call in B or C who already knows the scope of work, etc. Schedule to meet all contractors on one or two days and plan on getting stood up. I had a project in where I called dozens of contractors, actually made appointments with 30 contractors, had 10 show up, and received quotes from 3 and only 2 were written.

It's a long process to choose contractor backups, but if you do all of this while still in contract with the seller of the property, you still won't have any down time. You will absolutely have a better idea of what the project entails. When Contractor A flaked on the project, midway, I called in Contractor B who was already familiar with my project and picked up right where the first left off. They also like the idea of saving the day for you.

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