The art of house flipping isn’t as easy as you see on TV. The influence of television shows such as Flip or Flop has a great impact on people like you looking to flip a house for the first time. TV shows give you the glamorized version of house flipping.
This article is where you will get the inside scoop, the nuts and bolts, and the skinny on the work required to flip houses for a living. Since it is your first time, I expect you don’t quite know what you are getting yourself into but that is ok. When I first started I had no idea what I was doing. I learned as I started flipping.
You can learn as much as you need to get you started in the housing flipping business. Always keep in mind that knowledge will help you enhance your goals. You can never stop learning in this business always keep an open mind and an open ear.
I figured you heard that you can earn a hefty return on your investments or there are millions of dollars just waiting for you with your name on it before you decided to learn how to flip a house right?
Well, this could be true but I hope you are willing to put the work in to get you to your goal. Remember this is your first time. It is better to go into the house flipping business realistically. Never have your hopes up too high. If your head is in the clouds you are bound to have a major heartbreak if things do not go as you imagined. I am here to guide you in the right direction. I will give you tangible advice on how to flip a house for the first time. Well at the end of the day we want you to be successful and to try to avoid major mistakes.
So, here we go! Here are a few tips on how to flip a house for the first time.
Research Real Estate Markets
This is your chance to find out everything you need to know about flipping houses. You are not an expert just yet. You must learn the market you are trying to build a career in.
For starters, learn the real estate laws in your area. Laws can vary from each state especially on auctioned homes because they have title issues and tax liens from previous homeowners. You will want to see about fixing those issues before buying.
If back tax payments or liens are not fixed this could delay your buying process. Be very cognizant of all of your home buying options. That is why researching the market beforehand is key.
When you are looking into the local real estate market set a budget goal. You must be realistic on price, depending on your budget. You don’t want to be researching areas with $500,000 dollar homes when you can only finance $250,000 homes to start.
Although there are many investment financing options to choose from, you still want to be able to make an easy purchase with the budget you have. I still suggest researching all of your financing options if you want to increase your budget.
- Hard money lenders
- Private investors
- Friends and family
- Equity in your own home
- Local banks
- Seller financing
When researching the real estate market familiarize yourself with the neighborhoods you want to invest in. Real estate agents alphabetize the neighbors by A, B, C, and D. They may have A as the wealthier neighborhoods, B middle class home/business owners, C working class/blue collar, and D low-income neighborhoods.
If you are looking to buy and flip homes in the D neighborhoods be aware of all the risks that come with these neighborhoods such as crime and population. I suggest you only look at the high end or middle-class neighborhoods because you do not want to buy homes to flip in rental areas.
When researching potential homes to buy consider pair and cosmetic costs. These costs can sway your budget. If you can, please avoid as many structural and mechanical problems, the rehab process can be difficult for new flippers. You have to decide what you want to do when first starting to flip homes. If you can get a cosmetic flip that would be the best deal for a beginner.
Let’s review what a cosmetic home flip entails.
- Not many repairs needed
- May need new carpet
- New paint inside of the house
- Fixture updates bathrooms
- Paint kitchen cabinets
- New flooring in bathrooms and kitchens
- New air conditioner unit
The house may not have these exact things but most of these items you can have a contractor do quickly so you can get the house back on the market quickly.
The more expensive and risky flips involve gutting the inside, moving walls, and running new wires or pipes. This gets much more complicated, expensive and that makes it risky.
Create A House Flipping Plan
Take a brief moment to organize a flipping plan with a concise summary, market analysis, financial plan, flipping strategy, and an overall goal for your house flipping business.
The flipping summary should be a brief overview of your entire business plan. You should write down how many homes you want to flip in a year and the profit you are looking for on each flip.
The market summary should include an estimation of your business profitability. This section will show that you researched the market/neighborhoods you plan to invest in.
You determine how your business will be profitable by being smart and buying the homes cheap. You do not want to get emotional when flipping homes you want cold calculated numbers to pay for properties based on the flipping calculation rules.
By making assumptions on how you plan to buy your properties, pay for structural damages and renovations, and how you plan to sell the properties after everything has been updated. The financial section should explain how you plan to pay for everything.
Ask yourself are you going to use cash, loan, private lender, investor, any partnerships, saving etc. This is the most important part of your flipping plan because money is what is going to get the ball rolling. If my advice means anything to you I learned straight cash does better than any other financial outlet. Yet, if you really need to seek out a loan I suggest you start researching on the internet the best hard money lenders or private investors.
Once you narrowed your financial options down it’s time to start associating costs of repairs and other miscellaneous services.
Next is your flipping strategy.
- How do you plan to flip homes
- You need a timeline for renovations
- You need to know when to put the home on the market
- Then you need to figure out who is selling it a realtor or you
This is all about getting a great profit for your investment. This will lead to obtaining your overall goal. How much do you want to succeed at flipping? It all boils down to how much work and effort you put into your investment.
Let’s get the ball rolling!
Build your network of lenders and resources!
Building your network is really important in this industry. You must know the right people for the right times and having them on speed dial comes really handy in case of emergencies.
You will need to build out a list of companies and people to help you get this rehab machine going.
- Contractors for your renovation projects
- HVAC experts
- Real estate agents
- Title company
- Home inspector
- Real estate agents
Building relationships with real estate agents if you are not an agent is vital because real estate agents sell your newly rehabbed homes and find homes for you to buy. If a homeowner with a distressed property you know is looking to sell you would be the first person in line to make an offer. To be the first person you have to have a lead network and the leads need to come from different places.
Anytime you need any repairs for your home it is best to use your connections you have to help with the rehab. When you build up your network of specialist you create the core of your flipping business. These people eventually become a part of your team and it’s always best to have a great team. Start searching for a team immediately.
You will have a team ready and now you need to find homes. The key to flipping homes is to be able to find discounted deals.
How to find deals
You will need to have a system set up to keep a continuous flow of deals coming in for your flipping business. When you start you only need one deal. I would find the deal and then just do one flip at a time. Since you are new doing multiple flips will be too much for a first time home flipper.
You can find deals by using these marketing tactics.
- Have a realtor set you up with email notices of anything that comes up on MLS that is a handyman special, bank owned, foreclosure, short sale or rehab special
- Give your card out to realtors that work in the area you want to rehab and flip
- Pass out doorknob flyers in the neighborhoods you want to buy homes
- Use an online lead service business to get leads
- Look online at foreclosure listings
- Drive around every week in your area looking for homes for sale
- Find a wholesale person to buy leads
These are just a few things you can do to get your lead pipeline going.
Anytime you set a budget you must remember to always have a little more money tucked away just in case you do go over budget. Even though it is best to stay within your budget; life tends to happen and you may need to pull extra money from your savings.
When buying your first home to flip use the numbers to buy not feelings. Trust your first instinct. You must feel very comfortable with all of your purchases. Once you found the property you know has the numbers then make the offer. Stand by your master plan to flip and sell homes for a profit. Your plan well see you all the way through if you just follow it.
Once you have finally purchased a property hire a home inspector to make sure your repair estimates were correct. If you find some hidden repairs then see if you can take that cost off the original offer. You will have most of the repairs in your calculations just make sure you did not miss any major repairs.
To learn more on how to rehab a house from beginning to end check out our online course on this site.
We reviewed the market and your area. How to find deals in your local area. You need to put together a team to get the flipping machine cranked up. We also discussed how to find homes to buy because without cheap homes you have no business. Just work hard and develop a system to scale. Once you have the system you can really do well in flipping homes. There will be road bumps so just work through them to get to your final goal. You should be good on your first flip just follow our advice. Good Luck!