I still remember driving down the street slowly, looking from side to side for the run-down, vacant houses. This neighborhood was going through a revitalization and values were going up quickly. Near the end of the street, there it was. This one was obviously vacant and had severe fire damage. You could see where smoke came out each of the broken windows and went up the rock exterior of the house. The front door also had smoke all around it. The landscaping looked as though it had been unattended to for a very long time. Everything was overgrown.
I’m sure I told my wife, “Write it down and put some stars next to it.” That’s how we kept track of the ones that were without a doubt vacant and needing a lot of work (the stuff awesome deals are made from). Who knows how many times before we had driven around doing the same exact thing. This is what investors call ‘driving for dollars’.
The owner’s address was found on the tax appraisal district’s website, along with all of the dozens of other addresses we had found that day. My new, fancy, eye-catching postcard was going to do the talking to these private owners. We sent a postcard to each one of them.
How to Estimate Rehab Costs!
Estimating rehab costs accurately can make or break your real estate business, and it takes years of experience for even the best rehabbers to master the art. However, you can expose yourself to less risk and get more accurate with your projections by learning how the pros think when estimating construction costs.
Our First Flip Deal
Then, the fateful day came when the phone rang with a motivated seller on the other end. This wasn’t the first time we’d received a call from our mailings, or even the first time from a motivated seller. We had received quite a few calls over the previous months. This one was different though because the situation had the potential to be a great deal.
To make a long story short, we were able to buy the house cheap enough to be able to flip it to another investor it without doing any work on it.
It took us about 4 months to find that first deal. Four months once we decided to really put forth the effort and not give up. Four months of being consistent and persistent when we were just getting started flipping houses.
The First Deal is the Hardest to Find
For most new investors, the first house flip deal is the hardest to find. Many new investors are a little scared to jump in too fast and never even ‘really’ looked for a first deal. Of the ones that do start looking, most give up before they even had a chance to find one. It’s much easier to throw in the towel, throw your arms up in the air and exclaim, “this doesn’t work!” They start to wonder why any sane person would sell their house for so cheap. It just doesn’t make sense.
Don’t give up and then try to justify why you gave up.
It’s not ok. That’s why the majority of new investors fail at the house flipping business.
The few that keep working at it and keep faith that they will eventually find one are the ones that end up making it look easy. I seriously doubt the beginning was easy for anybody.
Ways To Speed Up The Process
Here are some ways to speed things up so that you find your first flip deal faster:
- 1. Have a clear idea of what you are looking for
- 2. Be ready to make a decision
- 3. Have several lines in the water
- 4. Give your marketing a chance to work
- 5. Test your marketing along the way
- 6. Don’t let doubt stall you
If you don’t know what constitutes a deal for you, how are you going to know if a lead you get is one? First you need to know which type of house flipping you want to do. If you are going to fix and flip, are going to use the 65-70% of ARV (after repair value) minus the cost of repairs formula? Are you considering wholeasling and if so, what is your target wholesale fee?
You’ve got to know what the numbers need to look like for a lead to be a deal so that you can make the decision when the time comes. I’m sure there are a lot of leads out there that are passed up because the person analyzing the deal didn’t know how much they should be offering. When you don’t know what you should be offering, you don’t make an offer. When you don’t make offers, you don’t get deals.
In order to know if the numbers are right for a deal, you are going to have to know how to figure out those numbers. You’ve got to be ready to be able to figure out the ARV and the cost of repairs (if you buy using the 65-70% of ARV formula, that 30-35% covers closing costs, holding costs, profit, etc.).
Have you found a Realtor that can get you comparable sales in order to figure out the ARV? Have you found an investor-friendly contractor that can give you repair estimates or at least walk you through a house and give you an idea of what repairs are going to cost so that you can figure them out?
You will want to be confident with your numbers so that making a decision to go ahead with a deal is done confidently.
You can speed things up by trying several marketing methods at once. You never know which one will get you that first deal. This way you can find out what kinds of marketing fit you better and work better for you.
You really don’t want to be doing things you don’t enjoy doing for very long. Of course, you could outsource. But, in the beginning, people are usually struggling with just being able to afford doing the marketing even by themselves.
Don’t make the same mistakes I did. Don’t just put out 20 bandit signs and then stop because you don’t get any calls. I’ve put out 50 before and not received a call. But, there were also times when I only put out 25 and got 5 or more calls. You just never know.
Don’t just mail out 50 letters, one time, to owners of vacant houses. Don’t just keep your ad in the newspaper for one month. Don’t just put 500 flyers out. Don’t just place that craigslist ad 5 times. Don’t just call one REO Realtor one time. Don’t just make an offer on 5 properties.
You get the idea.
Test your marketing. Give it enough time to show you how well it works and then change things up to see if you can improve your results.
Mail out two different letters to absentee owners. Keep track of how many calls you get with each letter. Use the winner as your control. Change the loser letter and challenge your control.
You can and should do this with all of your marketing.
We all struggle with doubt. Doubt that you are doing your marketing correctly. Doubt that your message is going to work for motivated sellers. Doubt that deals can be found in your area. Doubt that you will have the confidence to pull the trigger when the time comes.
Sometimes you’ve just got to have faith and keep working hard until things fall into place. You can do this and you will if you don’t give up.
Finding that first deal can take some time and a lot of energy. If you don’t give up, you will find it. With these tips you are sure to find that first flip deal sooner than later.
Oh, I thought I’d also mention that the second deal almost always comes much faster than the first one because your marketing that you did before is still working for you. People save postcards, letters, fliers, etc. and write down mumbers only to call months later.
Our second and third deals came on the same week only a month or so after the first deal.