There are many obstacles that can keep you from flipping houses. In order to give everybody the best chance to be successful house flippers, we’ll be discussing 6 steps that you need to take before start. Follow these steps and you can begin building the foundation for a long successful career flipping houses.
Step 1: Overcome Your Fear of Failure
The number one reason why most people do not get into flipping houses is because of fear. Fear of losing money, fear of failure, fear of the unknown, fear of disappointing others and fear of change are all very true to most people.
This is the cause of many who could be successful in flipping houses never even to try. The most important thing to do to conquer fear is not to quit your day job until you have at least a year of experience under your belt. It’s also important to have at least one year’s worth of salary as a fallback.
These sorts of safeguards will reduce the amount of fear in getting started flipping houses.
Another great way to overcome fear is to start educating yourself. Get out and start speaking to people who are currently doing it. Once you start realizing that these are people just like you, your fears start to dissipate. Now you’re ready to take the next step toward achieving your goals.
By Realizing that it can be done and that your fears are misplaced, you can check fear at the door and get on to flipping.
Don’t quit your job until you have a year’s of experience
Educate yourself by talking to people in the industry
Step 2: Start Networking
It’s extremely important to get out and talk to people and network yourself. As mentioned in step number one, this is an important part of overcoming fear. However, if you really want to get into fixing and flipping, the best way to start networking is to go to local organizations and start speaking with people who are actually doing it.
There are rehabbers, wholesalers, realtors, attorneys, lenders and real-estate professionals who meet every single month in your local area. Getting to know these people and seeing how their business works, as well as making some initial contacts, is an important second step in learning how to fix and flip.
Some of the best kinds of meetings are National REIA meetings, chambers of commerce and business networking groups. Get out there and start networking!
Make contact with people doing what you want to do
Attend local and national REIA meetings
Step 3: Start Building Your Team
This is an area where many people that are new to real estate investing are not so sure about. Fixing and flipping is not a solitary endeavor. While the reality shows might make you think that it is, building a competent house flipping team is essential to your long-term success.
First, it’s absolutely essential that you get a good real estate attorney. This attorney can help you set-up your business structure, whether it’s an S Corp., C Corp. or an LLC. You May want to ask some other real-estate investors who they use for attorneys. These referrals will be excellent potential sources of legal assistance which you’ll need throughout your house flipping career.
The same goes for certified public accountant. It’s essential that you get a good one. You’ll also need a great insurance agent. If you already have one, then this is a good start. Also, many of these real estate investor meetings provide business cards for contractors and builders. These Individuals will be absolutely crucial to the “fixing” part of your house flips.
Lastly, speak to as many real-estate agents as you can – both buying and selling real-estate brokers. These Individuals will be a great source of new deals for you in the future.
Find a good real estate attorney
Make sure you have a certified public attendant
Meet some contractors and builders
Step 4: Start Locating Property
Your real-estate agent on your house flipping team is likely the best resource for you to locate good property deals, but you need to be careful. Real estate agents make money by buying and selling property, not by turning a profit on your house flips. It’s extremely important to educate yourself and talk to them about your plan for buying properties and how you’re going to fix and flip them.
This is where your relationships with real estate agents are extremely important. You may even want to have more than one real estate agent for different areas of town. Once the real-estate agent starts to trust you and you start to trust them, they may start giving you access to MLS listings. You can then search properties have sold that in the area, as well as comb through all the properties for sale that they currently have. This is the most accurate way to find reliable comps, an extremely important part of your business.
In most cases, the real-estate agent will do all this for you. Depending on your relationship, you can get inside information on houses that might be coming onto the market. This will give you a huge leg up on the competition. Remember, it’s all about relationship building, and building great relationships with your real estate agents can get you the tools you need to run a successful house flipping business.
Build relationships with real estate investors
Try to gain access to MLS
Step 5: Analyze the Deal
One of the best ways to determine the value of a property is to compare it to other properties that have sold in that neighborhood. This is what is referred to as “comps.” Your realtor can help you with this by accessing MLS, as mentioned in Step 4. When you are looking at comps make sure that they are within the last six months. This gives you a recent indicator of what the market is like in your target area. Anything farther back than that isn’t as credible.
Once you have determined the comps on the market, you can accurately determine after repair value, or “ARV” for short. This benchmark price is what you will use in your calculations to figure out whether or not you can make a profit. Oftentimes this number is derived from the square footage of the house or from comps in the neighborhood.
It’s very important to make sure your ARV is realistic and not a fabrication. This is where many new real estate investors and house flippers go wrong. Make sure you bring along your contractor when you go through the house. It will help you determine what your repair costs will be. This is why it’s so important to get a good contractor on your team.
Another metric that’s used to determine what you pay for the property is the 70% rule. That is a rule that indicates that you should pay only 70% of the ARV in order for you to turn a profit. You then deduct your repair cost from that ARV. When using this rule, combined with ARV, you’ll avoid the bad deals as much as you will be a will to lock in profits on the really good ones.
Great deals are found through great analysis
If you can, use MLS to see what the market is like
Use the 70% rule to help keep your flip profitable
Step 6: Make the Offer
It stands to reason that you can’t fix and flip a property unless you actually buy it. This is where fear really manifests itself. This is where the rubber meets the road and you need to overcome that fear and actually make an offer.
If your ARV and your 70% rule add up, you have good intelligence coming from your real estate agent, and you have reasonable rehabilitation costs, pull the trigger. One of the biggest questions is how much you should offer on a piece of property. The bottom line Is that if you never make an offer, you’ll never own a property. So make lots of offers.
There are many ways to get into this step, but the most important thing is to keep it simple, start off slow and lean on the advice of your real estate team. If you stick to your 70% rule, and offer slightly less, perhaps 1% to 5% less, then you’ll always stay out of trouble and avoid bad deals.
Overcome your fears and make the offer
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