When I first became interested in real estate, I was, like many, looking for a quick, easy way to make a lot of money. Real estate did prove to be a way for me to make really good money, but, in the beginning, it wasn’t quick and it certainly wasn’t easy!
In the beginning, I listened to the gurus and the “flipping guys” on TV who made it sound so easy but when I set out to do it on my own, I realized it was A LOT they left out! I didn’t know what an ARV (After Repair Value) was, or how to estimate repairs, or what “carrying costs” were or any of the major things pertinent to assessing whether a house was even a good deal or not. I didn’t know anything about finding “motivated sellers” or what the 70% rule was, and that was just the tip of the iceberg when it came to all that I needed to know before venturing into any type of real estate investing.
What I DID know was that the average flipper made anywhere between $20,000 to $40,000 a flip and even a couple of those a year could replace my salary. That is what got me excited. I didn’t want to work for someone else for the rest of my life and that is what made me COMMIT to learning whatever I needed to know to make this work.
So, let’s go ahead and address the elephant in the room upfront. The second question I always get from people after they ask me how I got started in real estate is, “Where did you get money to fund your deals?”.
The thing about flipping is, no matter how you slice it, you’ll going to need money sooner or later. Even with a “no money down” financing method such as “seller financing”, you will still need money for repairs and carrying costs. If you already have money to invest, then, I’d say all you have to do is follow the steps for flipping I list below and you’ll be golden.
If you don’t have money, then, you’ll have to do conventional financing (institutional lending), private financing (friends, family, network) or you can start as I did, wholesaling real estate first to make some cash, then start flipping. (If you’re not familiar with how to Wholesale, go back and read newsletters 1-4).
STEPS TO FLIPPING A HOUSE
So, let’s say you’ve worked it out as far as where the money will come from for you to purchase your first flip and you’re ready to go. So here are the steps:
- Find a good deal – Everything in real estate starts with the deal. I did a whole newsletter (6/26/20) on analyzing a deal to determine if it’s worth pursuing or not. If you don’t know how to do it, go back and read that first. Once you find a good deal, then it’s time to move on to Step 2.
- Line Up Financing – Since we discussed this above, there’s no need to here but this will obviously have to happen for you to own the home whichever method you use.
- Find a good Contractor – You really need to take your time on this one. A bad contractor can turn your first experience (or any experience) into a nightmare. Even if the contractor comes referred, get pictures and contact information on their most recent projects. Call contacts and ask about their professionalism and how long they took to get the job done. Also, do not give them large amounts of money before starting the work. If they say they need to buy supplies, then have them go to Home Depot (or wherever they buy supplies) and pull the supplies so that the “Pro” desk can ring it up and give you a call. That is how I pay for all my supplies, then provide a draw to contractor at the end of each work week.
- Go over everything you want done – Don’t just assume the Contractor will know everything you want done. You must walk through and let him/her know your expectations. Then, have the Contractor put in writing what he/she will be doing. That way, there will be no misunderstandings about the work that you’re paying for.
- Check-in often – Check in periodically during the job to let the Contractor and workers know you expect them to work when they’re on your site.
- Final walk-through – Once work is complete, do the final walk-through with Contractor to make sure everything that you asked for was done.
- Sell House and make $$$$$$!