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17 Steps To Start Flipping Houses For Profit
Can you believe that the fastest property flip can happen within a matter of hours? Some hard core flippers know the system so well and have such a huge buyers list that they can profit from turning over a house with little or no effort at all.
But don’t fool yourself, quick flips in the category of hours don’t happen everyday. You might eventually reach a stage in your investing career with the resources and capacity to do that. And to reach that point of mastery, you need to start from the ground up unless you have a sugar daddy who have already conquered real estate in his lifetime. That will dramatically shorten your learning curve.
Here are the 17 steps you can expect to go through on your property journey.
1) Decide that this is what you want to do
I know. Talking about the mental game is so boring. And you really expect to see brick and mortar information here. Well you will get the nuts and bolts later.
The power of the mind is incredible. So many books have been written about it. Yet many people chasing financial freedom are still stuck in their own heads. You need to really believe that you can do it with 100% conviction.
With that, you exude certainty in everything you do from inspecting a house to negotiating a price. Don’t just think that successful flipping can potentially be the road to financial freedom. DECIDE that it will be the route that will take you there.
2) Get financing ready
There are many ways to finance real estate acquisition. You can go owner finance, mortgage, or even cash, etc. Whatever funding avenues that are available to you, get them ready so that you can move with the swiftness of a cheetah when the time comes.
Different options can be advantages for different types of deals. Which is all the more reason you should have as much options as possible available and ready to go.
3) Hire a dependable real estate agent
There are many descriptive words to describe real estate agents. I’ve found that the most important factor is not about being credible, ethical, or resourceful, etc. It is about being dependable. Someone you can depend on fully outweighs everything else. Even if your agent is not as well-versed as you would like on the transaction process, he will work it out if he is dependable.
I’ve also learned from experience that the most dependable ones who have the most at stake are the ones who you find yourself, instead of someone who is referred by a friend of a friend. For some reason putting social dynamics into the picture usually comes with complacency.
4) Focus on 1 or 2 areas to buy
You cannot realistically know the whole country inside out in terms of the real estate market. An industry overview is almost never a good reflection of what is going on on the ground.
Your best use of your research efforts is to focus your time on 1 or 2 areas, and get really involved and engaged in understanding them. Deep local knowledge is an absolute requirement for the types of flips that will make you an income worth 6 months salary or more per flip.
5) Focus on 1 or 2 types of properties to buy
Once you have determined the areas that you will focus on, it is time to determine the types of properties you will buy. From buildings, to commercial space, to single family homes. Decide on 1 or 2 to focus your energy on.
Experts in the commercial space are seldom just as knowledgeable in the residential space. And the same can be said the other way around. You can try to learn everything. But that is just not as productive as you can be. Choose what to go for, be an expert on it, and stick to your decision.
6) Determine what type of sellers you want to buy from
The ideal targets are landlords desperate to sell. But you can get more specific than that. There are home owners facing foreclosure, investors with vacant homes, banks looking to auction off the property, etc.
By determining who you would like to buy from helps to narrow down your focus like a laser beam. There are thousands of deals available each day. Having a clear focus helps you sieve out the gold from the dirt.
7) Decide how you are going to find the properties you want to buy
People who don’t dabble in real estate often get overwhelmed when they first start looking for houses to buy. Because there are so many avenues that they never gave enough thought about.
They include, direct outreach to homeowners, online listings, FSBOs, auction houses, probate assets, etc. The list can be overwhelming. Since you have decided to get into this line, it will now be your job to find out the best places to find the type of property you want, in the area you want, with the type of seller you are looking for.
Take note that sometimes certain strategies work better for certain types of properties.
8) Learn to work out the numbers
Sometimes the most obvious money-makers turn out to be duds. And sometimes the worst looking deals end up making you’re a pile of cash. To be able to put yourself in the best position possible to take advantage of good deals, you need to know your numbers.
The things you need to learn to estimate include property value, financing costs, rehab costs, taxes, projected rentals, time needed to put up a refurbished house onto market, etc.
9) How to make your offer
You need the expertise of a dependable agent or a good legal team to help you on this part. A straight forward cash purchase can be easy to document. But when you are looking at creative financing, it a whole different ball game altogether.
Make sure you have the best people you can afford to handle this part of the flip. They should be handling due diligence checks as well. If your people know their stuff, usually the main difference is a different set of documents to endorse.
10) Work out a clearer estimated rehab cost
If you have reached this stage, it means that your purchase is getting serious. This is time to get a more detailed estimate on the costs of remodelling the place so that the next buyer can see more value in it.
Create a scope of all the work that has to be done together with your contractor. They should be able to give you a pretty detailed cost estimate. Unless you already have a contractor you always go to, don’t forget to get 3 different quotes from 3 different contractors.
11) Work around your budget
Now that you have the detailed quotes in your hands, it’s time to compare it with your initial planned budget. If the costs exceeds your budget, bring down the costs by striking off elaborate stuff or use lower quality material.
For example, you could save up to 80% of custom fabrication if you decide to use laminates instead of real black wood. The same can be said of using veneers instead of real granite. There will always be room to lower costs when it comes to renovations. It’s just matter of how much you are willing to compromise genuine quality.
Remember to agree on a completion schedule before signing up a contractor. Stagger the payments based on milestones being reached.
12) Do you hire more than 1 contractor?
This is like a catch 22. If you just hire a main contractor to do everything, you would probably be able to get everything done a lot faster. But if you giveaway that much power to 1 party, there is always the chance of that power being abused. The participation of a second or third contractor could keep everyone on their toes. But that could extend the completion date.
So this is something that you have to decide for yourself. You can usually save some money by hiring more contractors. For example, your own electricians for wiring, your own plumbers for piping, your own painters to colour the house, etc. But be prepared to sacrifice more personal time to manage the project.
13) Assemble your salesforce
Because of the high price point of houses, every percentage point you can squeeze out from a buyer counts a lot in real numbers. This is why you want to hire the best people who have the best chances and networks to find the ideal buyer.
A lot of property owners cannot sleep at night when they think about how much they are paying an agent to market a house. But paying a commissions is well worth the money when an agent is able to sell at a high price in a short time.
Your sales force will handle all the marketing and listing in such an efficient manner that you could be wondering whether you had contributed anything at all to the selling process.
No point buying a pair of skinny jeans if you are not going to flaunt your legs. Home staging is the process of making your property look at it’s best. It’s not misleading. It’s just representing what you have in the best manner possible. It’s like wearing a suit for a blind date. You want to present yourself in your best light. The same goes with the house you have listed for sale.
Perception is everything. A skilled stager should be able to make a $100,000 house look like it’s worth double that. If you don’t have the fashion sense to do it, make sure to ask your agents for advice. They after all, have a stake in the sale.
15) Offer, negotiate, and close
The part of the whole process which you could be having the most fun is this stage. All your efforts to get to this point could be worth the adrenaline rush. This is when you see the weirdest buyers and most outrageous sharks engage you in combat.
It’s difficult to give advice on a general level. Just remember not to make the first call. And always negotiate up from the first offer which the buyer has made. When a suitable offer finally arrives, accept it gracefully. Then you might choose to throw a curve ball by starting to negotiate terms.
You should definitely ride on the advice of your agents and legal people about closing. Different legislation, practices, and processes govern different places. This is not the time to screw things up.
There are many deadlines and checklists to be completed before the dust settles. Let your staff do what you hired them for.
17) Collect payment by cheque