When I began investing at 23 years old, I had very little knowledge of real estate, finance, construction, or business. I was a newbie in every sense of the word! Devouring book after book helped me to quickly gain knowledge, confidence, and expertise. Thirteen years, hundreds of books, and hundreds of deals later, I’m still reading and learning. My bookshelf just keeps getting bigger! Reading is a fundamental part of success in real estate investing and with many other life goals. Even the ever-wise Dr. Seuss agrees: “The more that you read, the more things you will know. The more that you learn, the more places you’ll go.” Dr. Seuss, I Can Read With My Eyes Shut! Although I read a lot online, I prefer physical, old-fashioned books. My style of reading includes a pen, lots of scribbles, and folded down pages so that I can absorb and remember what I read. The book usually looks something like this by the time I’m done with it! In the rest of this article, I will share the results of my scribbles for a particularly good book called The Book on Flipping Houses. This book also happens to be published by BiggerPockets and written by long-time BP contributor J Scott. Related: 7 Things I Desperately Wish I Had Known When I Started Flipping Houses Brief Comments on the Book I included The Book on Flipping Houses as one of my 7 must-read real estate books for beginning investors. I haven’t found any other books on flipping that are as thorough and systematic as this one. You get both the big picture AND the details all in one package. In addition, the bonus spreadsheets and forms that you get when you buy the book on BiggerPockets.com are as good as the book. I use them almost daily. Do keep in mind that all of real estate is time and location dependent. So, I don’t recommend reading this (or any) book as an exact cookie-cutter for how you should buy your own flip properties. I’m sure even J has changed his business some since he wrote the book. But the framework and principles of J’s fix and flip philosophy will work any time and in any market location. Look at this book as the framing and rough finishes of your real estate flipping business. It will get you 90 percent of the way there. Then you’ll still need to get on the ground in your local market to put in the finishing touches by figuring out what marketing strategies, neighborhoods, and price ranges will work best. Now let’s continue with my 5 favorite lessons from the book. Lesson #1: Get Your Financing in Order First “For many investors, finding the money is the one thing standing between them and success. Now is the time — early in the process — to figure out where you’re going to get the money to do that first deal.” J Scott, The Book on Flipping Houses The entire real estate business could be simplified to this: Find money Find property Put the two together But the order is important. You’ll stress yourself out as a new investor hunting for properties without money. Deals could be right under your nose, but without a solid source of funds, the best you can do is make weak, contingent offers. And at least in my investing world, conventional bank loans aren’t good enough for purchases. My best deals often require quick, confident action. The bank approval process, which includes appraisals and underwriters, takes too long. Another investor with a quick source of cash (like ME) will buy it out from under you. When I first started investing, it wasn’t until I got a private money lender to help fund my deals that I started making confident offers that got accepted. The solid source of cash funds was directly linked to my solid, successful offers. If you read the book, the author J Scott does a good job in Chapter 2 of describing the various sources of money, like portfolio loans, private money, hard money, and partners. He also includes the benefits and drawbacks of each. Lesson #2: Go Out and Find a Farm Area For Your Flipping “Determining how well a market can support flipping houses is as much art as it is science. Unfortunately, I can’t give you a short checklist of things to look for that will decisively tell you whether a particular farm area will allow you to be successful as a rehabber. However, I can give you some general principles that you can evaluate to determine whether your area seems suited for profitable rehabbing.” J Scott, The Book on Flipping Houses This lesson was the takeaway that paid for my book purchase MANY times over. The lesson is all about going deep with your understanding and choice of a target market for house flipping. I had always done a good job of studying comps and quickly estimating ARV (After Repair Value). But I had not done a good job of comparing the different sub-markets in my area to see which would be the best for flipping houses. Related: The 7 Commandments of Choosing a Profitable House to Flip Not all locations are equally good for flipping. Doing a little bit of studying the statistics in your market will begin telling you a story about where you should focus your efforts so that you’re more likely to succeed. Here are six really good statistics that J suggests you use when you begin studying an area. In the book, he explains how to find the actual data, but I’ll briefly give you an overview here: Price Ratio of Distressed to Retail Sales: This statistic tells you how likely you are to find bargain purchases that can be fixed up and sold for a profit. I was shocked to learn that in my hometown of Clemson, SC, the ratio was almost 90%! So, foreclosures and other obviously distressed properties on the MLS were selling for about 80-90% of the retail price. But when I looked at other nearby towns, the ratios were much more favorable — like 50-60%. This obviously guided my future marketing efforts for acquiring flips. Percentage of Retail Listings That Sell: If too many of the listings in an area expire and never sell, you probably don’t wan’t to flip properties there. It could still be an opportunity to buy rentals if it’s a temporary problem (like the 2008-2011 downturn in some locations). But flipping requires retail buyers, so in the book, J suggests that you make sure at least 60% of listings in your area become sales. Months Supply of Housing Inventory: This just means how long it would take to sell all of the current inventory of houses for sale. A buyer’s market means there are MANY months of inventory, so sellers will typically be more motivated to offer concessions to sell a house. A small number of months of inventory leads to a seller’s market, where buyers often bid up prices and negotiate less. Both markets can work for flipping, but for new investors, J suggests a seller’s market as more ideal so that you can move your inventory quickly. Are Other Investors Active in the Area? Competition isn’t always a bad thing. If other investors are successfully flipping houses, that means you can probably do it, too. If no flipping exists in an area, it’s very possible the market isn’t ideal for the business model. Market Fundamentals and Trends: Whether you are buying to flip or to hold, it’s important to study your markets fundamentals. The key drivers of price in real estate include factors like population growth, job growth, and wage growth. If those indicators look to be strong well into the future, that’s a good sign. Likewise, certain indicators like overbuilding or massive job migration to other areas can spell big trouble for future real estate prices in an area. Qualitative Factors: Ultimately, residential real estate markets are driven by the emotional decisions of buyers who move into houses and neighborhoods. So, it pays to evaluate a location like a buyer would — on the ground. Get a feel for an area and judge for yourself where you and other buyers would want to live based upon criteria like nearby amenities, pride of ownership, mature landscaping, and reputation of schools. Using these statistics requires that you set aside a block of time to really dig in and evaluate your area. This, of course, makes sense in the beginning of your business, but it also makes sense to do it from time to time within a mature business. For me, this exercise guided some very important strategic decisions that have made my business partner and me a lot of money. Lesson #3: Evaluate 100 Houses Before Making Offers “I normally recommend that new investors look at 100 houses before they start making offers (“The 100 House Rule”) … The houses can/should be in all different conditions, neighborhoods and price points. The goal here isn’t to necessarily find a deal, but to get familiar with what actual houses in your area look like.” J Scott, The Book on Flipping Houses The 100 House Rule means that you physically look at 100 houses during the early stages of your investing career before making offers. Like J, I have been recommending the same practice for years because it’s so important. The principle and power of this rule is making market fundamentals intuitive for you. As a new investor in an area, your knowledge is only theoretical. Yes, you can look up comps, but the locals who’ve been working this location for a long time have a big advantage in their depth of knowledge. Buying properties successfully is a fast-moving sport. And sometimes the market data you find in comps will be contradictory or confusing. So, if you take days or weeks to evaluate each deal, you’ll miss many opportunities. Instead, you need to know intuitively what sells and why. That’s what the 100 House Rule helps you do. For example, after looking at 100 houses, you may learn that in your area, houses can sell for full-price whether they have granite countertops in the kitchen or not. You might have assumed you needed to invest in more expensive counters, but your experience looking at many houses told you differently. Related: What I Learned From Mistakes Made on My Latest Flipping Project [With Pics!] Or you might learn, for example, that many house flippers are adding a master bedroom wing to small, ranch-style houses in order to increase their value. This little “trick” could inform which houses you pursue for your own purchases. And you’ll learn many more nuances that won’t even become obvious at the time. But you’re filing away data points in your brain that will serve you very well as you begin making offers. Lesson #4: You’ll Need a Project Scope of Work and Schedule “Your Scope of Work (SOW) document is the single most important component of your project — it is the roadmap that will allow you and your contractors to get from the purchase of a property to a quality renovation that will make you money. Your SOW will help you develop your budget and your schedule and will help you create and carry out your entire renovation plan.” J Scott, The Book on Flipping Houses This was another one of those “aha” ideas for me. I had always created written repair lists and received bids from contractors, but a detailed and comprehensive Scope of Work (SOW) and project schedule were something I did not do. The SOW is basically an organized list of all of the tasks that will occur during the rehab project. It creates a blueprint that helps you to confidently and profitably execute a multi-step project. The schedule, on the other hand, helps to ensure that the project is done on time — because each day of delay costs you money in terms of holding and opportunity costs. J’s SOW system, which I’ve adopted for my own business, breaks down each rehab project into 25 different components, such as roof, gutters, siding, HVAC, plumbing, electrical, etc. J’s other book, The Book on Estimating Rehab Costs, gives you a more detailed explanation of estimating costs for these 25 components and how to create a budget. Large companies and developers regularly use a SOW and a schedule. They also often use complicated project management software to help. A simple, written SOW and schedule can work just fine, but small, mom-and-pop investors, which included me, often don’t even do that. Instead, we just fly by the seat of our pants, which often wastes money and time. The value of a SOW and schedule isn’t that the project reality will exactly conform to your plans. It rarely does. The value is in the process of planning. Former U.S. president and general Dwight D. Eisenhower described this concept best: “In preparing for battle, I have always found that plans are useless, but planning is indispensable.” When you have a systematic approach to planning, it forces you to think. It gives you a checklist that guides your daily actions. It gives you a road-map that helps you adjust when unwelcome surprises inevitably pop up. Lesson #5: Staging Sells Houses Faster “My wife and I are both big fans of staging our properties… I don’t believe that staging will necessarily help you command higher prices for your rehabs, but I do believe it will help you get your properties sold much more quickly than without staging.” Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free J Scott, The Book on Flipping Houses Time is money. It’s a cliche, but when you flip houses, it’s painfully obvious how true it is. Between interest and other holding costs, my own cost of a vacant house is often $30-40 per day! So, anything that can shave time off of a sale is valuable. Like J and his wife, I have found staging to be a critical part of a fast sale. Staging doesn’t change the fundamental drivers of value, like location, number of bedrooms, or condition, but it does contribute to that all-important, difficult-to-quantify equation of emotional appeal. A study by the National Association of Realtors found that 96% of buyers agents surveyed agreed that staging either usually or sometimes impacts their buyers’ decisions. When a potential buyer walks into a well-staged house with nice furniture, splashes of color, and tasteful decorations, their imagination is stimulated. The buyers can now imagine themselves sitting on the back porch, using the kitchen, or watching TV in the living room. But when a house is vacant or cluttered with junk, positive imagination gets more difficult. Sometimes the buyer’s imagination just gets stumped or confused. And that’s bad for decision making. The end result of staging is a faster path from impression to decision. Which means your houses will typically sell faster. What Did You Find Helpful in The Book on Flipping Houses? If you haven’t read The Book on Flipping Houses and you want to become better at the business of flipping, it’s a no-brainer purchase. I’ve only touched the surface of the good content you’ll get in the book, and I’m sure you’ll profit from it as much as I did. Reading a good book is like an in-depth conversation with the author. You’re getting the benefit of their years of sweat, blood, and tears condensed into one organized bundle. And what I like best is that you can engage in the conversation as many times as you need to by just pulling back off the shelf. Best of luck with your flipping and with the rest of your real estate investing business! Which of my 5 favorite ideas did you find most helpful? If you’ve read the book, what other ideas did you like? Do you like this format of book review? I have plans to share more if enough readers think it’s worthwhile. I’d love to hear from you in the comments below.