Getting started flipping houses

2 Replies

@Kevin Jones

Hi Kevin! 

The Flipping Blueprint by Luke Weber is recommend a few places for being a step by step guide. But in 'CliffsNotes' version, I'll try to break it into number steps just for ease of reading;

1. Determine your financing - this obviously comes from a variety of sources from personal funds, IRAs, Hard/Private money etc. That should probably be your first step in knowing how much you can, do or will have to work with. 

2. Decide if setting up an LLC is right for you- many people acquire properties with an LLC, in using the corporate veil of protection they offer (tax and liability purposes) This can be done online easily, a lot of folks choose Delaware as the State of origin.

3. Once you've established funding and any legal set up, the next step would be choosing location. This is going to depend on the goals you're trying to reach (i.e. it may not be as financially lucrative to fix and flip in CA, even if you're in CA)- so if not in your location, where suits you best (most of the time it comes down to who you have to work with in other areas or purchase price point mixed with ARV)

4. After you've determined location, it's making connections in the area (even if local) that will come into play later on - talking with agents, contractors, etc- just asking them questions and seeing you feel like you're getting the best read on who to work with, and ideally have long term relationships with for future projects as well. 

5. Determine how you're going to acquire properties- by means of wholesaler or agents, or both. That's pretty individually specific and where your relationships come into play (i.e. you may have some great conversations with a contractor who happens to also wholesale and find deals that way, or you may talk with an agent that has off market deals or simply uses the MLS. You may feel better being a newbie using an agent. Your conversations may want to include home inspectors and just getting an idea of what their 4 and 5 point inspections look like.

6. When looking at deals, and keeping their ARV in mind before making an offer, are they hitting your all in mark- (all in, totally invested at ideally 60%, but usually never more than 70% {exceptions on super high end ARV's class A areas can apply to more})

7. Either using yourself if experienced, your agent's opinion, your contractors estimates on rehab or a combination method get a rough idea of rehab costs (this is most always an estimate, as time and costs go over more often than not)

8. Once you've determined a deal does in fact meet your all in mark (purchase, closing, rehab, holding, etc) it's onto offering (assuming you're bypassing sheriff's auctions/foreclosures) which is going to be either a cash to close deal (using a wholesaler, paying cash) or if financing offering through agent (after submitting location, comps, rehab estimates to someone like a hard money lender for funds)

9. Rehab takes place and this is where it's crucial to keep on top of things and make sure deadlines are being met, as well as budget (too often, first time flippers get excited about design ideas seen on the likes of HGTV, and go way over budget on levels of finish higher than necessary, killing their bottom line)

10. The re-list (a great place to use your agent from purchase if you were pleased with their services offered, plus most investors {especially out of state from the property} would not attempt to FSBO.

My best advice would be to completely submerge yourself into an area(after finances are sorted) and find out as much as possible about it before you invest there if you're not local. Connect with professionals to better your chances of having success faster. This is going to include area comps, determining what Class area it is, and even things super location specific like being in areas that require one union member on a job site (does not apply to each market). 

Hope that helps some = )