Chapter 4

Building Your Dream Team

IN THIS CHAPTER

check Picking a real estate agent with flipping know-how

check Acquiring sound financial advice

check Covering your back with a title company, appraiser, attorney, and inspector

check Hiring contractors and subcontractors to handle the heavy lifting

Most people who talk themselves out of investing in real estate are defeated by a false assumption — that they have to do it alone. The truth is that you don’t have to do it alone. In fact, attempting to fly solo is one of the most common and serious blunders you can make when you’re getting started. Investors who excel at flipping houses are team builders, capable of selecting talented players, coordinating their efforts, and harnessing their skills.

By surrounding yourself with a team of experienced and talented people, all you really need to succeed is a long list of qualified individuals with diverse talents, along with a phone, a pad of paper, a pencil, and some people skills. You don’t know what a house is really worth? Consult a qualified real estate agent. You’re not good with money? Hire an accountant. Can’t hammer a nail? Call a carpenter.

Sure, hiring these additional people costs extra, but as long as you can accurately estimate the total costs, calculate them into your budget, and still profit from the flip, you win. (See Chapter 12 for details on calculating costs.)

I don’t have all the essential qualities to successfully flip houses. What I do have is the ability to admit that I lack certain qualities and a knack for finding people who complement my skills. In this chapter, I show you how to build your own house flipping dream team.

remember A dream team is more than just a skilled workforce. It’s a combination of people who have your best interests at heart. They want you to succeed. Money alone can’t buy a dream team. You have to nurture these relationships by rewarding the people who reward you through their expertise and hard work. Fair payment on time, sincere compliments and thanks, positive referrals, and free food go a long way.

Teaming Up with a House Hunter — a Quality Real Estate Agent

A real estate agent (or house hunter) who knows the ropes and has the right contacts can assist you in managing the two transactions that are critical to your success — purchasing a house at less than market value and selling the rehabbed house quickly at a profit. In the following sections, I explain the beneficial services that agents can provide and give you guidance on finding the best agent for your flipping needs.

warning Although you may be able to handle one or both transactions (selling and buying) on your own in an attempt to trim costs and boost your bottom line, I strongly discourage it, especially when you’re flipping your first property. You’re about to invest tens or perhaps hundreds of thousands of dollars. A qualified agent can help you navigate the process and avoid common pitfalls that can turn a plump profit into a big, fat loss.

Recognizing the value of agents

A good real estate agent is more than just a clerk who pushes paperwork through the system and juggles numbers. He’s more like the concierge at an upscale hotel. He’s dedicated to serving your real estate needs, whatever they may be. And if he can’t personally attend to those needs, he knows someone who can.

Sure, a qualified real estate agent costs money, typically a 6 to 8 percent commission, but when you consider the amount of money you’re investing, a single mistake can cost you thousands more. A real estate agent who has plenty of experience working with investors can assist you with the following:

  • Helping you track down investors and other sources of cash. (See Chapter 5 for more about financing your flips.)
  • Finding houses that meet your search criteria, even when those houses aren’t actively advertised as being on the market. (See Part 2 for more about finding properties to flip.)
  • Assisting in evaluating properties that you may want to purchase so you don’t pay more for a property than it’s worth. (See Chapters 10 and 11 for tips on evaluating specific properties for purchase.)
  • Ensuring that your offer has appropriate conditions in place to protect you. For example, you may want to make your offer contingent upon the sale of another property you own, the property passing inspection, and the title company’s assurance that the title work is in order. (See Chapter 13 for details on offers and negotiations for buying a home.)
  • Negotiating price, financing, terms, date of possession, and other sticky areas of a purchase agreement.
  • Expediting the closings (whenever you buy or sell a property) to ensure that nothing goes wrong at the last minute and offering solutions when everything goes wrong at the last minute.
  • Assisting you in estimating the cost of repairs and renovations or putting you in touch with someone who can.
  • Referring you to reputable contractors, subcontractors, and other professionals (see “Hiring Contractors and Subcontractors” later in this chapter).
  • Broadcasting your rehabbed home to every real estate agent in the neighborhood via the Multiple Listing Service (MLS) — a listing of homes for sale that goes out to all the real estate agents in your area — and helping you sell it in half the time it would take you to sell it yourself. (See Chapter 21 for more about marketing your rehabbed home.)
  • Evaluating offers on the rehabbed home in a way that doesn’t compromise your position in the market. Some offers, for example, can tie up your home and leave you little compensation if the buyer backs out. (See Chapter 22 for info on negotiating and closing the sale of your rehabbed home.)
  • Advising you on how much rent you can charge for a property if you want to hold on to it for a while and you need some cash flow.

remember A talented agent can help you locate excellent investment properties in a fraction of the time it would take you to do so and help you purchase properties for thousands of dollars less than you would pay if you negotiated the purchase yourself. On average, you take twice as long selling a property yourself than you do when you work with a real estate agent, and every day your home sits on the market costs you money.

Picking an agent with the right stuff

Any licensed real estate agent can help you find, purchase, and sell a house, but you want someone whose experience and training are rooted in the business of flipping properties. The qualities to look for include the following:

  • Specialty in your target area: The agent should know the market in which you want to invest and be well-versed on property values, market conditions, and neighborhood news that may affect future property values.

  • Experience in other methods of finding homes to purchase: Shop for a real estate agent who specializes in your area of interest, such as FSBOs (For Sale By Owners), foreclosures, HUD (Housing and Urban Development) homes, probates, or bankruptcies. With this approach, you become the fox in the henhouse with an inside connection.

    tip Consider using more than one agent. One may specialize in sheriff sales, another in probate, another in bankruptcy, and another in real estate owned (REO) properties — repos owned by banks. Having a large inventory of agents gives you a larger inventory of listings to generate more income. Don’t just go with your high school buddy who happens to be a real estate agent.

    tip If an agent gets bank listings, buy from that agent, because he gets both sides of the commission. When you flip the house, list it with him. With the agent getting the listing and the selling commission (in my industry, called a “double dip”), the agent will be more motivated to help sell the home (as opposed to your high school friend who might ask you for half the upside).

  • Proactive approach: The agent shouldn’t wait for you to call but should call you with any leads for properties in your target area. If calling isn’t your preference, your agent should be able to set you up to receive automated e-mail messages that notify you of new listings immediately.
  • Eagerness to show houses: The agent should be willing to show many houses before arriving at the right house.
  • Availability on short notice: If you see a For Sale sign in someone’s yard and want to see the house, you should be able to quickly contact your agent to set an appointment for viewing the house at a convenient time for you. The agent should have a cellphone number, home number, and e-mail address; check for messages regularly; and promptly return phone calls. If your agent is going to be out of town, she should notify you of the dates and line up someone to field your calls.
  • Comfort with presenting low-ball offers: If an agent cringes at offering a price well below market value, he’s not the agent for you. He should be willing and able to pitch one or more low-ball offers with a poker face.

  • Top-seller status: An ideal candidate is skilled not only in finding good deals but also at marketing and selling properties for top dollar and in a reasonable amount of time.

    tip As you search the classifieds and notice For Sale signs and brochures in the neighborhood, note which companies and agents do a better job of marketing their properties.

  • Tech savvy: Real estate deals move at warp speed, and you want an agent who takes advantage of all of the tech tools available to find, buy, and sell properties. For example, your agent should have access to more powerful property-search tools than you can access on the web and set up automatic e-mails or texts to you when properties that match your search criteria become available. If an agent seems uncomfortable with technology, choose someone else.

  • Personal experience flipping properties: Personal experience is a big plus, because the person knows what flippers require to turn a profit and typically has a strong network of affordable contractors to perform repairs and renovations. Preferably, the person is no longer in the business of flipping properties; otherwise, she may take the best deals for herself.

    warning Don’t use experience in flipping houses as your sole criteria for choosing one agent over another. You want a quality agent — experience in flipping is a bonus.

The best way to find an agent is through referrals from other homeowners (buyers and sellers), preferably your friends, relatives, or neighbors. When you have a list of 10 to 15 names, start calling around and interviewing your candidates to compare their experience, education, and certification as described in the preceding list.

warning Many books on buying and selling houses recommend that you try to convince the agent to accept a lower percentage in commissions or a flat fee for helping you buy or sell a property, but this tactic can backfire. I suggest that you find the best agent and then pay the agent the going rate or a little more. Your agent is going to work harder for clients who pay more, and no card-carrying capitalist can blame her.

Recruiting Moneymen (and Women)

Flipping properties for a profit is all about money — getting it, spending it, paying taxes on it, and using it for your next flip. To succeed, you need someone who’s good at managing the finances while you’re busy buying, rehabbing, and selling. Actually, you may need at least three people who are good with money — one or more to loan you money, a second to help you manage it and save on taxes, and a third to recommend the best way to invest it. The following sections describe the types of financial assistance you need.

Finding financiers

Unless you’re independently wealthy, you need a source of cash to get started. You may be able to tap into your savings account, mortgage your home, and max out your credit card, but strong financial backing from investors can provide you with the capital you need to leverage your personal investment. The big question is: Who can you ask for investment capital? Here’s a list to get you started:

  • Start with friends, family, and your attorney. They already know you, and charity begins at home.
  • Tell everyone you come in contact with that you flip houses. An investor may hear about it and contact you, but be careful — an investor may be looking for a newbie to snooker into a raw deal. Question any deal that requires you to take on an inordinate share of the risk.
  • Contact doctors, lawyers, dentists, and other highly paid professionals you know who may be looking for a better return on their investments than they’re currently getting.

warning Whoever lends you money is going to want a mortgage in the first position that protects her investment. If you’re investing in foreclosure properties, make sure that you purchase a first mortgage — not a second mortgage or a junior lien. In Chapter 10, I explain how to do your homework so you know exactly what you’re buying. Even if lenders choose to forgo security, insist on it. The most important thing as a flipper is that you protect your investors’ assets.

If you contact everyone you know and you’re still short on cash, consider approaching a hard-money lender. Hard money is typically a short-term, high-interest loan. In Chapter 5, I discuss various types of loans, including hard money, and I provide more information on securing the financing needed to flip properties.

remember Finding investors can initially be a frustrating chore, but your future success will draw investors to you who are willing to share the risk and eager to work with an experienced and knowledgeable flipper.

Hiring an accountant

Most of the accounting that applies to house flipping consists of simple addition and subtraction. Add up the costs of buying, renovating, and selling the house and subtract that from the amount you receive when you sell the house, and if you come up with a positive number, you made money.

Unfortunately, reality is a little more complex, and having a professional accountant on call can help you avoid unnecessary expenses and legal woes. Your accountant can take all your money and receipts out of your shoe box, sort through them, and figure out whether you made any money, and if you did make money, he can calculate the amount of tax you owe. An experienced accountant also delivers the following services:

  • Saves you money on income tax while remaining in compliance with complex IRS tax laws. This helps you cover your bases and take advantage of tax code. Section 179 of the IRS tax law is a good example. It states that if you qualify, you can expense as much as $25,000 of a vehicle if it weighs between six and fourteen thousand pounds. I did this in 2015 to take advantage of Section 179. I was able to write off/depreciate $25,000 of the total cost of the vehicle in the first year, giving me a large savings on taxes. These opportunities are out there for you to take advantage of if you or your accountant is savvy enough to catch them. (See Chapter 23 for more about tax issues.)
  • Reminds you to pay your property taxes on time.
  • Evaluates your house flipping activity to determine whether you’re considered an investor or a self-employed dealer.
  • Makes sure you pay your quarterly estimated taxes if you’re considered a self-employed dealer.
  • Ensures you pay your quarterly estimated taxes on your capital gains if you’re considered an investor.
  • Offers a sanity check to make sure that your grand vision for the house doesn’t blow your budget.

tip Ask your family and friends for referrals to qualified accountants who have experience with real estate. If you already have an accountant who has little experience in real estate, ask her whether she knows of someone. Interview at least three candidates and be sure to ask about their experience in real estate.

My first two CPAs didn’t work out when I was first starting out. My third CPA came through a mutual friend of mine who was a CPA and CFO of a successful company. He had a friend with an independent CPA practice. The rest is history. I’ve been using this CPA ever since — for the past 20 years.

Obtaining sound investment advice

When the money starts rolling in, your first impulse may be to roll your profits into your next flip, but that’s not always the savviest approach. You may want to sock away some money in tax-deferred accounts to save on taxes and protect your gains. A knowledgeable financial advisor can provide the advice you need to make the best use of your profits.

remember People who flip houses are often short-sighted. They focus three to six months into the future but can’t see 20 to 30 years down the road. A financial advisor trains her vision on your long-term financial future and can help you take appropriate action now to build wealth for your retirement years. For details about long-term financial planning, check out the latest edition of Personal Finance For Dummies, by Eric Tyson, MBA (Wiley).

Consulting a Title Company and an Insurance Agent to Cover Your Back

When you sign on the dotted line to purchase a property, you own not only the property but also all the problems associated with it. Buy a property from someone who’s facing foreclosure, and you may just own a property that has one or more liens against it — legal claims against the property to secure a debt. (See Chapter 8 for more information about foreclosures and Chapter 10 for guidance on how to research a property.)

To avoid unforeseen problems associated with the title of a property you’re about to purchase, hire a title company to search the title history. A title search ensures that

  • The property you think you’re buying is the property you’re actually buying.
  • The person selling the property is the person who owns it.
  • You’re aware of any liens against the property or taxes due.
  • Any rights, such as mineral rights, are transferred to you.
  • Your deed or title is in recordable form.
  • You’re aware of any restrictions on the property; for example, if you’re buying a home in a historical area, the renovations may have restrictions.

Reputation and location are the two main considerations in choosing a title company. Pick a company that’s nearby and has the best reputation for smooth closings. Your real estate agent can recommend a title company that has a solid reputation in the area.

tip At the closing, obtain a copy of the final title insurance policy, which the seller typically pays for. This policy is your guarantee that the title is clear. If any hidden issues arise later, the title insurance company is accountable. Always get title insurance when buying a house.

Speaking of insurance, you should always obtain a homeowner’s insurance policy for any property you purchase. In fact, you should consult an insurance agent prior to purchasing a property to make sure the policy is in effect as soon as possible after you close on the property. I know of a case involving raccoons that got into the attic of a home and did about $15,000 worth of damage. The good news was that the investor had the right insurance on the house and was covered for the damage.

Make sure you have an insurance agent on your team who can help you insure not only the properties you purchase but also anyone who does work for you and doesn’t carry insurance for himself or herself. The added cost for insurance is well worth the price. If someone gets hurt on the job, that can cost you big time.

Locating a Valuable Appraiser

When someone buys a home, the person typically borrows money from a lender and uses the property as collateral for the loan. The bank or other lending institution orders an appraisal of the property to make sure it’s worth enough to cover the loan in the event that the buyer defaults on the loan. The buyer typically pays for the appraisal as part of the closing costs.

As a flipper, you don’t need an appraisal unless you’re borrowing money from a lender who requires an appraisal to approve the loan. However, if you’re unsure of the value of a particular piece of property, an appraiser can help you confirm the potential profitability of a property or perhaps present you with some figures that make you think twice about pitching an offer. You can ask the appraiser to provide you with two estimates: property value before repairs and renovations (as-is value) and property value after repairs and renovations (after-repair value). Such an appraisal may cost a little extra, but the additional information may help you make a better decision, especially when you’re just getting started.

If you’re in the market for an appraiser, ask your real estate agent, title company, or attorney for a recommendation.

tip To determine whether a property is worth buying, check out the recent sale prices of comparable properties in the same neighborhood and consult your real estate agent or another experienced investor for a second opinion. An appraisal may do you little good when you’re buying distressed properties at a deep discount.

warning Whether you’re buying or selling a home, beware of inflated appraisals. Some real estate scams rely on inflated appraisals to sucker mortgage companies into lending more than the home is actually worth. If the seller is willing to take $185,000 for the house, but it appraises at $225,000, paying the seller $225,000 with the intent of receiving cash back from the seller is fraudulent. Nefarious appraisers may also jack up the value of a home to inflate the homeowner’s equity so the owner can qualify for a loan. Don’t rely solely on an appraisal to determine the true value of a property. By specializing in properties in a certain price range and in specific neighborhoods, you can become an expert on property values in that niche.

Adding a Real Estate Lawyer to the Roster

All lawyers are not created equal. You can find attorneys who specialize in divorce, disability, criminal law, personal injury, corporate law, and so on. When you’re flipping properties, you want a real estate lawyer. An experienced real estate lawyer can offer valuable assistance in the following areas:

  • Purchase agreement: Purchase agreements are complex documents that cover not only the sale price but also the terms of sale — tax prorations, occupancy issues, water bills, personal property in the house, and so on. Unless it’s in writing, a purchase agreement is subject to dispute. Inexperienced real estate agents often introduce errors, costing their clients hundreds or thousands of dollars.
  • Title: Your lawyer can advise you on the best way to take title in your situation. For example, you may want only your name on the title or your name and your spouse’s name if you’re married. A lawyer can also inspect the title work to ensure your protection. (See the earlier section “Consulting a Title Company and an Insurance Agent to Cover Your Back” for more details.)
  • Complex transactions: Some transactions may include an assumption of the mortgage or enable the seller to finance the purchase. When complexities arise, having a lawyer on call is always a plus.

tip To find a qualified real estate lawyer, ask your real estate agent, friends, and family for referrals or contact your local bar association. Don’t resort to merely picking a name out of a phone book unless you really have to. The ideal candidate possesses the following qualities:

  • Efficient and affordable: Attorneys often charge by the minute, so beware of long talkers.
  • Supportive: Someone who second-guesses all of your investment decisions can paralyze you with doubt.
  • Unobtrusive: Your lawyer should protect you from unseen risk without sinking the deal. Some lawyers justify their fee by becoming too technical with the documents, which can hinder your ability to close on good deals, while annoying the heck out of you.
  • Available: A good lawyer is available when you need her.
  • Experienced: A real estate attorney who owns real estate and rentals is better than one who doesn’t.
  • Generous: A lawyer who shares his leads can help you find properties that you couldn’t find on your own.

warning Lawyer fees can range from a hundred to a couple thousand dollars. Compare rates and services closely and make sure that you consult a lawyer who specializes in real estate.

Lining Up a Home Inspector

Whenever you make an offer on a house, make the offer contingent upon the house passing inspection. Then, have the home professionally inspected. This contingency ensures that you don’t get stuck holding the bag on any of the following big-ticket items:

tip Although most buyers hire private home inspectors, I prefer using city inspectors because they tend to be more thorough and they’re well versed on local building codes. The city inspectors in my area show up as a team that typically includes a plumber, an electrician, a heating and air-conditioning specialist, a builder, and someone who specializes in zoning. You get a thorough inspection and a complete write-up for about the same price you pay a private inspector. If the inspection uncovers problems, you can sign off on the recommendations, agreeing to make the necessary repairs after you take possession. However, not all towns and cities offer inspections, and some offer them only for new homes, so this option may not be available to you.

If a team of city inspectors isn’t an option, have your contractor do a walk-through. Having someone inspect the home who can make the fixes himself is best, assuming the person is trustworthy; you don’t want a contractor who recommends upgrades merely to keep his crew busy and boost his own bottom line. A home inspector will give you a list of so much to do, you’ll want to quit before the first coat of paint. The goal of the inspector should be to recommend repairs that make the house marketable and not overlook any major/costly defects.

tip If you decide to go with a home inspector, you can track down qualified home inspectors by visiting the National Association of Certified Home Inspectors (NACHI) at www.nachi.org. When you have a few leads, contact your candidates and ask them the following questions:

warning You don’t want a home inspector who makes mountains out of molehills. He can deflate your balloon of enthusiasm with a thousand pinholes. Don’t nitpick a great deal. A homeowner who’s selling a property at a clearance price often does so to avoid the costs and headaches of making repairs. Nitpicking can ruin your chances of acquiring a great piece of property.

Also, never hire a family member or friend as a home inspector even if he’s qualified, because he’ll become the expert and tell you what you’re doing right and wrong. The problem is he may not completely understand the project and what you’re trying to accomplish.

tip Make sure all utilities (electricity, gas, water) are turned on prior to the scheduled inspection so the inspector can check the furnace, plumbing, and electrical system. In vacant homes, the previous owner or the bank may have the utilities turned off. Be at the property when the gas and water are turned on, just in case something’s leaking or a faucet is turned on.

Hiring Contractors and Subcontractors

When flipping a house, you can do as much of the fixing up as you’re qualified, comfortable, and willing to do (see Chapter 14 for details on distinguishing between do-it-yourself projects and hire-a-pro projects). For those hire-a-pro projects, hire a contractor or subcontractor:

remember On isolated jobs — jobs that require only one subcontractor — you can often do the contracting yourself. For more extensive projects that require the coordination of multiple workers, a general contractor may be better suited. To me, a general contractor represents additional overhead I don’t need to pay for. By working closely with the subcontractors to coordinate the work, you should be able to handle the general contracting yourself, but if you have any doubts about your own abilities in managing the project, hire a qualified contractor. Chapter 14 can help you plan and manage your renovations so that the subcontractors aren’t tripping over each other.

In the following sections, I explain how to find and hire contractors and subcontractors. I also tell you when a handyman (or woman) may be better suited for your needs.

warning If you decide to play the contractor role, obtain a permit before starting work on any project that requires a permit, such as building a room addition, a deck, or a garage or installing a pool. If you don’t obtain a required permit, authorities may show up and issue a stop work order. You may have to pay a fine. If you’ve already completed the project and the work doesn’t adhere to local building codes, you may need to redo or undo the work at your own expense.

Tracking down top-notch contractors and subcontractors

Good help shows up on time, performs quality work, charges reasonable fees, and completes the job on time or ahead of schedule. Finding good help is one of the main challenges of successfully flipping properties. Fortunately, you can network your way to the best help in your area by doing the following:

  • Ask for referrals at your local hardware store. Word-of-mouth is better than advertisements or a name on a grocery store bulletin board.

  • Ask real estate agents, investors, and other real estate professionals for references. When they’re not working, real estate people talk … a lot. Good contractors and subcontractors have a solid reputation.

    warning If your real estate agent volunteers to act as your general contractor, think twice about hiring him; good agents typically make horrible contractors. If your agent is good, he’s serving his clients well and has neither the time nor the desire to get involved in construction. Besides, agents don’t like to get their hands dirty; contractors do.

  • Contact your insurance company. Most insurance companies have a database of contractors who do everything from installing carpet to cleaning up after floods and are happy to steer you toward the right person, especially if they’re footing the bill.
  • Talk to friends, relatives, and neighbors who live in the area and find out who they hire for specific jobs.
  • Contact a referral service such as Angie’s List (www.angieslist.com), which provides ratings and comments from homeowners.

Making sure you and your help are on the same page

When you’re hiring a contractor or subcontractor, you have three goals. You want the job completed to your satisfaction, on budget, and on schedule. To achieve these goals, here’s what you do:

  • Draw up a one-page agreement stating when the contractor is to start and finish, with a built-in fee of $50 for every day beyond the scheduled completion date. When you get the contractor’s estimate and proposal, attach your agreement to it. The contract should specify a start date and an end date, and contain language stating that the contractor must consult with you before performing any additional work not mentioned in the contract. Your agent or lawyer can help you draft a suitable contract.
  • Let them know when the For Sale sign is going up.
  • Give them what they need to succeed, including deposits and supplies.
  • Have them furnish you with receipts of their purchases.
  • Show up unannounced at the worksite to see whether they’re working.
  • If the workers are doing a good job, tell them so, and do it often.
  • Don’t strive for perfection. If the work is 90 percent satisfactory, shut up about the 10 percent that’s not quite perfect.

warning Beware of the following issues when contracting workers:

  • When hiring a contractor or subcontractor, make sure that the person is insured against both property damage and personal injury. An average hospital bill can wipe out your profit.
  • Be careful about deposits, especially when you’re dealing with a contractor you don’t know. Contractors have been known to take the deposit and disappear. A 25 to 50 percent deposit is normal — generally, the smaller the contractor, the larger the deposit. You can pay most handymen weekly.

tip To reduce the risk of getting ripped off, do your due diligence: Check references, workmanship, and the amount of time the contractor has been in business; ask the contractor whether he’s licensed and insured; and check with the state or your local Better Business Bureau to see whether anyone has filed complaints against the contractor. Also consider searching the web for the contractor by name to determine whether any positive or negative reviews have been posted online.

warning Your contractor should supply you with a separate proof of insurance form, attached to the bid, verifying that the contractor and his workers are insured for this particular job. If you’re hiring a subcontractor who’s moonlighting from his day job, he may be covered under his company’s insurance policy, but he may not be covered during his stint as a moonlighter. When hiring a contractor or handyman who can’t provide you with proof of insurance, contact your insurance company and take out a separate workman’s comp policy (or add coverage to your current policy on the house you’re flipping) that covers anyone who’s working on your house. Added insurance takes a little extra time and costs a few hundred dollars, but if you’re not covered and a worker is injured on the job, he may sue you, and you may lose your entire profit and even some of your own personal savings. I estimate that only about 5 percent of the people who flip houses follow this advice — but those who don’t are vulnerable to suffering a big loss.

When I hire contractors to do work for me and they don’t have insurance, I get insurance for them. It’s affordable, and you don’t want to be responsible for injuries.

Finding a handyman and other helpers

You don’t necessarily need a licensed subcontractor to do odd jobs around the house. A handyman (someone who’s handy with power tools and hand tools) can often complete small jobs for a fraction of the cost a subcontractor charges. If the house needs all new wiring or plumbing or has structural damage, pay a little extra for a licensed expert. For smaller jobs, such as leaky faucets, clogged drains, drywall repairs, and new window dressings, a good handyman is usually the more affordable choice. I say “usually” because sometimes a specialty service, such as a replacement window company or Grout Doctor, can provide quality workmanship for less.

Word-of-mouth is still the best way to find a handyman, but your neighborhood newspaper provides additional leads in the classifieds. (The local paper is also a good source for finding general laborers and trash haulers — perfect for cleaning out that cluttered basement, attic, or garage.) Craigslist is fine for finding a candidate, but make sure the person has positive reviews or testimonials or can provide names of people in your area who will vouch for her work. The handyman with the fanciest truck and flashiest ad isn’t always the best or most affordable. Look for a worker with paint-stained pants and weathered hands. Performance and reputation carry more weight than marketing glitz.

tip In the summer, consider hiring neighborhood high-school and college students who are off for the summer. Many of these kids work hard, especially with the lighter stuff like painting, cleaning, and doing yard work. Just be sure you’re there to supervise and make sure that your eager students are following safety precautions.