TORONTO - Canadian real estate investor/contractor Scott McGillivray judges four teams as they compete to turn around the most profitable home renovation on the new series "Flipping the Block."
Premiering Sunday at 9 p.m. ET/PT on HGTV Canada, the series sees the teams using the same budgets to fix up their own units that are exact replicas of each other within a condo complex. They then put the units on the auction block and the winner (the team that sells its condo for the most) keeps the return on investment, plus a $50,000 cash prize.
McGillivray, who's been flipping properties off and on for 15 years and hosts the HGTV series "Income Property," says "there's still a fantastic market for flipping" in Canada.
He offers these five tips for those interested in getting into the flipping game:
1. Ask yourself if you're fit to flip.
McGillivray says a lot of contractors are getting into the "flip game" because they know how much it costs to get the work done and they can do it themselves, which is key. If you aren't able to pick up that sledgehammer, you might not be successful.
"The best way to make money with a flip is to do some of the work yourself, if not all of the work yourself, and the best people at this are contractors and designers," he says.
"We have a huge advantage when it comes to flipping properties because this is what we do for a living. So we can come in, do it at cost, maybe even less, and then reap a huge benefit."
2. Look for a property that needs work and offers opportunity to build in some equity.
"If it's already completely renovated, there's no room to appreciate the value or force any equity into it," says McGillivray. "So the first thing you're looking for is a property that is not necessarily obtaining its full potential. The worst house on the best street type of scenario would be a perfect example. That's not always how it works.
"You're usually buying the moderately nice property on the best street, or you're buying in a neighbourhood that's up-and-coming a little bit and you're setting the trend."
3. Calculate your potential expenses when first viewing the property. Then line up your contractors and bring them through the place before closing to get quotes.
"If you start trying to get everybody together after you close, you're going to be scrambling," says McGillivray, who has dozens of income properties and will be taking over HGTV Canada's social media accounts on Sunday.
"You're supposed to be focusing on doing the work, not pre-planning the work, when you had 60, 90, 120 days to close. That's all your preparation. Timing is everything, so pre-plan — you're going to save time, you're going to save money, you're going to profit on your flip."
4. Once you have the property, start the work immediately.
"What you have to be careful of in a flip is time," says McGillivray. "Time is your enemy. The longer you hold it, the more carrying costs you have, so flipping properties, there's a huge sense of urgency. You should be starting your demolition on closing day."
As for what to start on, McGillivray prefers to rip it all apart on Day 1 and tackle everything at once.
"No doubt someone is going to be delayed, so you might as well have everything else happening," he says.
5. Don't compromise on quality, and don't overlist. Today's buyers are smart, savvy and know a problem when they see it.
"There's a huge mistake that people make when they get into flipping — they think that the less money you put into it, the more money you're going to make, but they don't factor in quality, so that is a fallacy that is incorrect," says McGillivray.
"It's about the more quality you put into it while still being frugal, the more money you're going to make. And if you compromise quality, you're going to get stuck with that house yourself — nobody wants to buy it."
Another big mistake is pricing a property too high, which can scare away potential buyers.
"It might be worth that, but you've already basically shut out half the audience because a lot of people are searching within a certain category," he says.
"So don't get greedy. Pigs get fat, hogs get slaughtered. List either appropriately or a little less, get your offers in there, get it sold quickly."
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By Victoria Ahearn, The Canadian Press