The Basic Steps to Flipping a House
So youre interested in flipping homes like they do on t.v. huh. Well it is a very rewarding career if you choose it. I say career, because flipping in my opinion cannot be done part time like rentals can. It requires your full attention, especially while the rehab is active. If you have the time and the passion, here are the basic steps you need to take in order to flip a home successfully.
1- Learn Your Market
one of the most important steps in the process, so don't try and rely on others to tell you what areas are good to invest in, learn it for yourself.
2- Join Your Local REIA
join your local REIA, and network, network, network.
3- Master the Numbers
you need to learn all the formulas used to determine what to pay for a possible flip. Remember these formulas arent set in stone, but are necessary in understanding how to look at an investment property solely on the numbers.
3-Create a Business Plan
create a clear and concise business plan.
4- Find a Partner
Let it be known in your local REIA group that you are ready to take the leap, but need a partner. You will need to show that you know how to determine what to pay for a property, and that you have a clear and concise plan to execute the flip from start to finish. You will need the partner for there expertise and must be willing to allow them to have the lions share of the profit in exchange for the education and experience.
5- Create an LLC
After finding a partner, and agreeing on the profit share, make it official and legal.
6- Find the Deal
Your local REIA and BiggerPockets.com, will be a great place to start. There are wholesalers and investors who will be willing to sell you a property, but you will have to build rapport and trust first. You can browse the MLS, this is where mastering your market really helps. You can also find deals by learning how your local court system auctions off foreclosures (I will blog about this more later).
7- Purchase the Deal
This is when you use all the number crunching you have mastered. Your profit is made here, if you purchase wrong, you will guarantee yourself a loss.
8- Hire a General Contractor
Have a number of GC's walk throught the property and give you estimates based on the work you want done. Just go ahead and throw away the cheapest bid, trust me on this (more on this in a future blog). Contact three of the middle priced contractors and ask for the phone numbers of previous customers and contact them. It is also a good idea to ask the GC's if you could walk through a current job site with them. Pay attention to the workmanship and professionalism. Choose the best of the three, and write up an agreement for the pay schedule and timeframe. (more on this in a future blog).
9- Check In
Check in every day to make sure the GC is on schedule and is doing a professional job. You will need to answer alot of questions that pop up with the different trades, so its best that you are there.
10- Choose your Finishes
This is very time consuming, and if you don't have a good sense of design, you will need to find someone who is. The finishes are what sells a home fast and for top dollar, so be frugal but not cheap!
11- List your Property
List your property on the MLS, however do not do it the conventional way! This is a little known secret among the masses, there are agents that will list your property on the MLS for a flat fee ie: $375. When they do this, you will be expected to take the pictures yourself, write the comments for the property listing, and negotiate the sale price with the buyers agent. You will save thousands if you do this, ie: $100,000 home with a common 6% agents fee (3% listing agent, 3% buyers agent) you will save $2,625! We are currently rehabbing a flip that we will be listing around $435,000, that will mean a savings of $12,675!
12- Sell and Celebrate
Negotiate the sales price, go to the closing, and collect your big fat check :). Split the profits with your partner and celebrate!