Many real estate investors are turning to house flipping as a means of earning the cash needed to fund a full career in real estate. But before you jump in thinking that the process is so fast and easy that it can get cooked down to a 30 minute television show, you need to understand that reality tv is nothing like a real house flip. There are some important things that every investor needs to know to be a successful flipper.
1. Educating yourself is by far the first and most important thing that you need to focus on. You need to learn about the process of evaluating possible homes to flip as well as the skills and trades that you might need when doing any of the renovations. If you are not a handy person or don’t want to be a hands-on renovator, then also begin to seek out quality contractors to work with you on your flips.
2. As you get more comfortable with the scope of work for house flipping, and hopefully more excited about the process, you will need to sort out your financing. There are many ways to fund your first few flips including traditional loans, non-traditional loans, a home equity line of credit on your personal home or even a personal loan. But having all of that in line before you begin seriously shopping for a property will help you to look within your budget and be ready to buy when you find the right property.
3. You will also see very quickly that the flipping market is very competitive. You will need to establish a few good resources other than scanning the MLS on a daily basis. There are thousands of other people looking at those homes each day. You can begin by driving around looking for homes listed as for sale by owner and hope that you beat the crowd and can make a fast offer to win the property. Sending out direct mailers is another way to find a seller before the house is even on the market.
4. Following the numbers on every property is critical. You need to evaluate the property and set a hard number that will be your maximum offer. This is a last resort and provides the minimum return on your investment that would make the project worth doing. If the profit is not there,, then never take on a project just for the sake of doing work. Keep your maximum allowable offer in mind as you prepare to make an offer to the seller.
5. Make your offer once you are comfortable with your numbers. In the beginning it can be hard to trust your math skills and property evaluation prowess, but don’t over think the offer too long or it will be too late. The only way to learn is to make offers and see what works and what becomes a challenge. Every new investor makes mistakes, it is just important to learn from them and understand how to correct them. You also need to know that you will only win a small percentage of your offers so make as many as you can in the beginning and wait for the first deal to be accepted.
6. The closing on your property will vary depending on the location. In some states you will need an attorney but no in others. The closing process is one aspect that you should have researched in your learning time frame to have a good idea of what to expect and to be sure that you are well prepared to meet the closing requirements in your area.
7. Managing your flip is a very hands-on process. You need to stay on top of each trade and contractor on a daily basis. After all, you are their customer. You not only want to keep a close watch on the cost and any overruns but also be very mindful of your schedule. The loss of a single day early in the project can throw off the rest of the schedule for all of the other contractors. Remain professional but never let the contractors dictate the timeline of your project. For this reason, it is always advisable to have a backup contractor selected in the event that your first choice has a timing issue or is not meeting your expectations. Once all of these steps are completed, you are ready for the big finish. Now it is time to sell the property and get your money back as well as your profit so that you can reinvest in another property and continue to grow your money.
