How to flip a house?

Flipping houses is a great way to generate quicker money then a buy and hold. It’s a lot more riskier than wholesaling but is a lot more profitable. All of the strategies I talk about in these blogs all tie in together. For a flip, just like wholesaling and wholetaling, you’re still finding an under market value property and getting it under contract. Just like a wholetail you’re going to close on it, but the difference is, you’re going to do the renovations instead of selling it as-is.

The way I run my numbers to see if a house is worth purchasing is:

ARV (after repair value)

Miinus: Selling costs

Minus: Desired profit

Minus: Renovations

Minus: Holding Costs

Minus: Closing Costs

= MAO (maximum allowable offer)

This is a quick and easy way to run my numbers to see how much I can pay for a property.

How do I figure out all these costs?

To find the ARV you want to connect with a realtor that can get comparable properties to yours with the same amount of square footage, same number of beds and baths, in fixed up condition that have sold in the last couple months. The selling costs are typically (depending on your area) realtor commissions of 4% of the sale price plus your lawyer fees which typically are anywhere from $1,200-$2,500. For desired profit, I usually shoot for a $60k minimum on my deals. Holding costs are your monthly mortgage, taxes, utilities, insurance multiplied by the amount of months it takes to renovate and sell. Lastly closing costs are (in Ontario) land transfer tax along with your lawyers fees.

Running your numbers like this also takes the emotion out of the purchase. I see so many people get too excited about buying a property that they let their emotions get in the way, they fall in love with the deal which causes them to over-pay. You must be very numbers focused and conservative with the numbers.

How do you find a flip?

Flips are everywhere, you just have to know where to look. A few of the many strategies I use to find flips are Kijiji/Facebook, direct mail marketing, door knocking, and social media posting. There are hundreds of ways to find deals, you just have to be creative with it. My most expensive but profitable source is direct mail marketing. Canada Post has a service that you can send out flyers to specific areas, It costs me around $0.16 cents per flyer to print and send out.

What if I'm not a handy person?

If you’re anything like me, you’ll hire the work out instead of doing it yourself. But where do you find a good contractor? You hear all these horror stories about bad contractors but where do you find them? For me, I get referrals from other investors who are doing consistent deals with this contractor. I also want to take a look at their work before going with them. It’s very important to do your research on a specific contractor because they can make or break your deal. If they take longer than anticipated, that costs you more in holding costs. If they do a sloppy job, it can take longer but also more money to fix the job.

Key takeaways:

• Flipping can be risky
• Know your numbers
• Don’t exaggerate your numbers
• There are many ways to find deals
• Qualify your contractor

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