Need some extra cash ASAP—but not willing to go the way of bank robbery? The good news is that flipping houses is a feasible way to earn cash relatively quickly!
So how exactly do you get started flipping houses? While there’s much more to learn (and many more resources on BiggerPockets to help you out), let’s reduce the process to seven simple steps.
The 7 Steps of Flipping a House
1. Educate yourself.
Know what the heck you’re getting into. House flipping is awesome, but it can be risky. So watching videos like this one is a great first step, but don’t stop here. Check out our books on flipping houses and the rest of the articles on this blog. Then ask all of your flipping-related questions as they come up in our forum dedicated to this topic—and get answers from experienced investors who have been where you are. Who knows—maybe you’ll meet your next partner there. Speaking of…
2. Figure out your funding.
Maybe you need a partner. Maybe you need to check out hard money lenders. Or maybe you need a combo of various financing strategies. Whatever the case, look into how you plan to finance the deal before you look for the deals themselves.
3. Find leads.
Landing good deals isn’t always easy, especially in a competitive market. Sure, finding a good real estate agent is a solid first step. But incredible deals are hard to come across on the MLS these days. Luckily, there are alternative strategies: For instance, you could get creative and send out direct mail letters or find run-down houses by driving around.
4. Analyze your deal.
Will this deal actually make you money? You’ll want to make sure you analyze your prospect closely and back into whether you can get the ROI you want out of it. Start with: What profit do you want to make? This will help inform your maximum allowable offer (MAO) or the maximum amount you can afford to pay for the deal and still get paid the profit you want.
5. Make an offer and keep your MAO in mind.
Make an offer that makes sense for your numbers—and most of the time, get ready to be shot down. Once in a while, though, the numbers work for both parties, and you’ll have yourself a flip.
6. Close on the property.
Depending on where you are, the closing process might involve different steps. For instance, in some states, you might need an attorney. Understand what the steps look like in your specific market and come to the closing prepared.
7. Manage the flip.
Don’t underestimate the tight hold you need to have on your contractors to get the job done as quickly and efficiently as possible. And remember, you don’t want to overspend on things that don’t allow a lot of of value. You might love that quartz countertop, but will it add significantly to your selling price? What’s the market you’re aiming to sell to?
Bonus: Sell that flip.
The selling process might seem straightforward, but there are tips and tricks for selling for more money. If you’re looking to get insider advice on how to get the most for your property (and offload it as quickly as possible), check out How to Sell Your Home.
That’s it in a nutshell. Any questions about this process? Any important aspects I missed?
Leave your comments below!