Flipping Real Estate: Fact or Fiction?
Your Quick Guide to Making Money Flipping Real Estate in 7 Simple Steps…
Every time you turn your head, someone else is talking about flipping real estate. What are they really talking about and is it something that YOU can do?
First, let’s define the two types of “flipping real estate”.
1. Flipping the contract: (Also known as “assignment of contract”) You find a property for “pennies on the dollar”, put it under contract and then “flip” that contract to, most likely, someone that is going to do the rehab, or renovation on the property.
2. Flipping real estate: Buy a property, fix it up, and resell it to an “end buyer”. This is known as “flipping real estate”, “rehabbing”, or “retailing” to name a few. OK, now that we’ve gotten the terminology out of the way, I want to first start by telling you that real estate is simple, but not easy, so if you’re looking for a get rich quick scheme, you’re probably going to get yourself into trouble.
Now… on to how YOU can make money flipping real estate. We’re going to focus on the second definition of flipping real estate: buying, fixing and reselling.
Step #1 – Find the Right Deal
If I made a dollar every time someone told me there were no more deals, I’d be a multi-zillionaire by now! Here’s the thing and I want you to get it through your head! There are PLENTY of deals – even where you live! Make a consistent effort to really look for houses that are overgrown, in need of paint, possibly boarded up, etc. These are going to be your best bet for flipping real estate.
Step #2 – Estimate the Repairs
You can either go ahead and bring a contractor or handyman with you or you can get a simple calculator that will figure out the “rough” numbers – like the one found at www.fixingandflipping.com . Understand, however, that more often than not – like 99.99% of the time – your budget will come in lower than your actual costs! You may also want to have a home inspection to check out the major items: foundation, roof, plumbing, electric, HVAC, etc.
Step #3 – Negotiate the Contract
This is where many people run away from real estate. “Contract” is not a four letter word! In fact, it is your best ally when you are negotiating!
Use your contract negotiations to pay for the repairs by getting seller contributions and repair credits. This will keep you from having to dip into your own pockets for repairs!
Make sure that you have a way out in case the deal isn’t going to work for you. Some “escape” clauses that you can handwrite in are:
- “Subject to satisfactory appraisal”
-“Subject to partner’s approval”
- “Subject to satisfactory inspection”
Step #4 – Find Your Money
Don’t get caught up on this one! Finding money is really much more simple than you might imagine if you’ve followed steps #1 - #3! I know it sounds cliché, but it’s true: Find the right deal and the money will come. You can use private lenders or hard money lenders if your credit’s a little shaky, or in some cases, you may even be able to use a regular mortgage company to get the deal done! Just make sure it all makes sense financially!
Step #5 – Get Your Contractors in Place
You should have your workers ready to go before you even close the property. Think about this: what if your monthly payment on the property is $1500/month? That’s $50 each and every day out of your pocket while the property is just sitting there… Be ready to start the moment you close!
Step #6 – Manage the Renovation
Unfortunately, you MUST stay on top of your workers! Use a solid contractor agreement that protects you and follow up on them daily. Stop by every couple days minimum and push, push, push until the job is done!
Step #7 – Market and Sell the Property
Put a For Sale By Owner sign in the front yard immediately to start building a buyers’ list. Once the job is complete, call all the interested parties back and invite them to an open house and accept offers! Make sure you’ve kept all of your receipts so you can prove any repairs to the buyer’s mortgage person and/or the appraiser.
Sure, it’s possible to go ahead and turn property over VERY quickly. My record from closing table to closing table (the time I bought the probably til the time I sold the property) was 53 days for a quick $10,000.
But, make NO mistake, those types of deals are few and far between, so be forewarned – Flipping real estate takes work… But the rewards can be HUGE!
Recommended Resources:
Finding Deals: www.motivatedsellermarketing.com
Estimating Repairs: www.fixingandflipping.com
Finding Contractors: www.servicemagic.com