First, right off the bat, off let’s tackle the “Is flipping houses illegal?” question. Flipping homes or flipping anything for that matter, real estate or otherwise, is perfectly legal. The term has recently been used in the main stream media to describe what is essentially mortgage fraud. In a mortgage fraud scheme multiple people collude to inflate and falsify appraisals, doctor and falsify loan applications, invent fake people etc. That is definitely illegal and can get you serious jail time. But here’s the thing I could never understand….you can only do that once or twice and then, even if you get away with it up front, you are a fugitive for the rest of your life! Is one big check worth that?
Real, honest flipping is defined generally as one person finding an undervalued opportunity in real estate and getting that property under contract to purchase it. He or she then sells or “assigns” that contract -- for a fee-- to another investor and that person actually closes on the property. The person buying the property usually does not even need a mortgage – they just write check. It’s really a pretty symbiotic relationship. Finding great deals takes time and people with money and the resources to fix properties don’t usually have lots of that. People who are interested in getting involved in the business usually have lots of time so they do the leg work to find the house. Also people, like me, who dislike the management of crews and the time consuming work of a rehab project prefer to be the wholesalers and to make a business of it. I actually prefer the term “wholesaling houses” to flipping. All business have wholesalers in the distribution chain, this is no different.
For over seventeen years now I’ve felt like a kid on a treasure hunt every morning. My job is to dig up the gold, to find the diamonds in the rough.. This the only really high paying profession I know of that you can start with just a small amount of education and mentorship and a little bit of guts. A profession where you make your own hours and YOU determine how much money you’re going to make.
I’m often asked “how do you find all those great deals, Mike?”
Finding undervalued houses is not rocket science. I call it “reverse sales”. By reverse I mean you aren’t selling something you’re buying it but most of the same principles apply. You need to prospect or create a steady stream of sellers to talk to. Now like the new salesman you can start by knocking on doors and cold calling or you can work the smart way. You can advertise to find home sellers motivated to sell now!
Advertising driven wholesaling is changing the face of the real estate investing business very rapidly. Large companies like the huge HomeVestors, small mom and pops and smart individuals are all advertising to buy houses. Advertising works, plain and simple, you see bandits signs, billboards, television and radio spots and of course the ads in the newspapers.
What the new or inexperienced wholesaler does not know yet is the term or concept of ROI, that’s return on investment. The phone will ring but is it cost effective? Are you keeping track of what it costs you to buy each deal? Do you know which method is producing the best returns for your invested dollar? Study marketing not real estate.
The business of finding undervalued deals is changing so fast that almost no one can keep up. Don’t be left behind. The advertising driven, ROI business model is taking over the once private, very localized business of flipping houses. Big, organized companies are now getting involved because there are big profits to be had. Don’t be under the misconception that you need lots of money to start. I started with hand written signs on telephone poles and three line ads in tiny local papers – very inexpensive.
Get in the business now and stake claim to your niche in your town. What other business can you earn fees of $3,000, $5,000, $10,000 or more for a few hours work driving around looking at houses?