If you are a golfer, you know that some days you can do nothing right. You hit (or shank) your ball left, right, short, long, in the trees, in the water, in the sand, and basically have a horrible day. You start to mumble to yourself, “This is it, this is the LAST time I’m ever going to play this lousy game!” Then it happens. You’re on the 18th tee box, exhausted. Not caring anymore, you release your backswing and suddenly out of nowhere, you crush a 280 yard drive right down the middle of the fairway like a pro. WOW, you think to yourself, this feels amazing!! At that moment, you remember why you love playing the game, and now you can’t wait to play again! Sometimes the same thing can happen to us in our businesses.
When you first start out flipping houses, the large checks are great. They are very exciting for a while, but after 10-20-30 deals or so, they just become the norm. In some ways it becomes like a job. You have good days and bad days. You may even forget why you started in the first place. BUT, when one of those awesome deals comes along, you are again reminded of why you love what you do!
Here is one of those examples from our world.
When we first started our business in 2008, we were only focused on renovations. It never occurred to us that in some situations you can make more money cleaning or pre-habing a house than you can renovating! We had so many leads we were throwing away because they didn’t meet our criteria for renovating. That was not a great strategy, so we decided to look at other options.
It was about a little over a year ago when we received a call from a bandit sign. The message said, “We have a house to get rid of. It’s full of junk, and we are asking $25K”. It was not an area of town that we wanted to renovate in, but the price intrigued us. We made the call, went to see the house, and made them an offer of $20K, to which they said immediately said yes to on the spot! Any seasoned investor knows that if the seller says yes that quickly, they surely would have taken much less!! Se we kicked ourself knowing we should have offered $10K instead!! But don’t feel bad for us (like you would!), it worked out just fine!
How to Analyze a Real Estate Deal
Deal analysis is one of the best ways to learn real estate investing and it comes down to fundamental comfort in estimating expenses, rents, and cash flow. This guide will give you the knowledge you need to begin analyzing properties with confidence.
Here is the Timeline…
We close on the house and had our cleaner scheduled to do his thing. Check out this symbiotic relationship: We have a guy here locally who owns a secondhand shop. He PAYS US to clean out houses! It’s a win-win! We get the dumpster delivered, then he cleans out the houses and keeps what he wants. Of course we take some time beforehand to look to make sure nothing of great value jumps out at us. He is like the guys on Storage Wars, but with houses. That’s a good tip for you investors to save on clean out costs and actually make a little money.
So at this point, we are already up $500 on the house. He does a great job cleaning, and when we go to inspect, low and behold, it’s a decent house! So we think about it, and wonder if we should try to sell it as is instead of going to all the trouble to rehab it. So we put it on the market for $79K.
A bidding war erupts … ready for this … We sell the house for $85,000 Cash! All we did was make one visit to buy, one call to our clean out guy, one call to our dumpster guy, fielded a few calls for the sale, and signed the paperwork. It was a cash buyer and we closed in about 20 days. After all the dust settled, we cleared over $62,000.00 for making a few simple phone calls.
This is one of the deals that makes you keep coming back for more! Let me be clear, THESE DO NOT HAPPEN EVERY DAY, at least not in my world. They are the rare deals that come along that require very little work, and you can make a years salary in a few days. As long as you are in the game and keep moving forward, they will happen for you too!
If you are a new investor, let me ask you this: Could you find $20K if you could turn it into $85K the same week? I hope you said YES! Even if you had to use credit cards at 34.99% for a month, it’s more than worth it! Thanks to Ali Boone for that suggestion here on BiggerPockets!
How You Can Do The Same
Investor Tip: When you buy a house to flip, look for all of the possible exit strategies for quick cash.
Will you do a full rehab then sell it?
Did you buy it at such a discount, that you can just sell it as-is for a profit?
Can you simply clean it and sell it?
Can you do minor renovations to pre-hab it and make a nice profit?
Can you sub-divide a building lot off of the property? (We’ve had great success with this method)
Remember, you are a Real Estate Investor. It’s all about time. The quicker we turn money into more money, the better our returns are. Keep your options open. I wish I had earlier in my career! Then again hindsight is always 20/20.
Do you have any quick profitable deals to share? We would love to hear them.