How to Flip Houses for Beginners


Getting into real estate investing is not really that hard. Doing real estate investing right to make a profit and not lose your shirt is a different thing. Flipping house is not easy for beginners. Like everything that people learn that is new and hard it takes time to get good. If you can make it through the first five to ten flips you might just get good enough to do well.

This venture into making money by flipping homes is not for the faint of heart. You really will get tested from managing contractors, staying on budget and finishing the work on-time to make a profit. It sounds easy and the shows on TV make it look easy but that is not the case.

Let’s look at how you would go about flipping a house as a beginner.

Two types of house flipping

There are actually two ways to flip a home. We are going to discuss both but this article will discuss how to make money buying a home and fixing it up to re-sell.

  • Flip a house you just bought at wholesale price to another investor. You can actually find a deal then turn around and sell the house to another investor. This is called wholesaling in the real estate investing world.

Here is an example:

You get a home in contract for $100,000 and the ARV of the house is $200,000. You can get a contract on the home then find a buyer to buy from you for $107,000. You will profit $7,000 and you did nothing to the home. You flipped the property to another investor to have them rehab the home. I have done this before it is really quite easy especially if you have a good title company that knows how to do double closings.

  • The second thing you can do is to buy a distressed home and you do the rehab. This will make you more money than wholesaling if you have the ARV and rehab cost correct when you buy. Buying at the right price is the key to being successful when flipping homes. Once you rehab the property then you put it on the market and sell it for a profit.

The plan

You want to flip homes then you will need a plan to execute what you want to do. Here are all the things you need to think about when putting together a plan.

  • How will you find a house to buy
  • Where can you buy distressed properties
  • How much should you pay for distressed property
  • How to I calculate rehab cost
  • Where do I get the money to buy the home
  • Where do I find good contractors
  • Do I need permits for the work
  • Contractor signing a contract
  • Manage the rehab
  • Where to get a realtor to sell the home
  • Finalize the work prepare for selling
  • List the property
  • Staging property what to do
  • Profit from selling the home now repeat

All of this plus more needs to be in your plan so you can move quickly to flip houses. The longer you hold property the more it will cost you in profit. Write out a plan and the example below should give you an idea of how to do it.

You buy a house that needs minor repairs because you are a beginner. Here is how your basic plan should look like. We will give some dates with the timelines so work starts May 1st.

Inside the home repairs

Wall repairs

Duration 1 to 2 days work

Complete by May 2nd

  • Have contractor patch all cracks, holes or rough spots on all the walls
  • Contractor will sand it once dry, wipe it down and apply second coat
  • The second coat will need to be sanded then wipe walls down

Paint walls

Duration 1 to 2 days work

Complete by May 4th

  • Paint all walls and ceilings before doing anything else. Most paints have prime plus paint so make sure to get really good paint do not buy cheap stuff like $20 a gallon

Furnace and AC

Duration 1 to 2 days work
This work can be done at same time as the inside work is going on

Complete by May 2nd

  • If you cannot fix them then replace both

Landscaping

Duration 1 to 3 days work
This work can be done at same time as the inside work is going on

Complete by May 3rd

  • Mow grass, weed eat, plant bushes and plant flowers
  • Cut back any tree limbs or brush that is unsightly
  • Repair or get rid of broken down fences
  • Edge the sidewalk and driveways
  • Mulch the flower beds
  • Plant grass seed in barren areas of lawn

Exterior painting of house

Duration 1 to 3 days work
This work can be done at same time as the inside work is going on

Complete by May 3rd

  • If there are areas of the house that need painted then scrape
  • Then after scraping you will need to paint – most paints have prime and paint so make sure to buy that type

Wood – Carpet – Vinyl Flooring

Duration 1 to 3 days work
Carpet is one of the last things to do

  • Install flooring in the house
  • Clean up house get ready for showings

Realtor

  • Marketing on an easy flip like this one should start right away
  • Once house is done get pictures and add them to marketing program
  • List house on MLS

How and where to find distressed property

You need to find good deals in order to buy them. The pipeline needs to be full all the time so once you’re done flipping one home you can do another. Here are some ways to find houses discounted.

  • Connect with local realtors to know when discounted properties are being sold
  • Real estate clubs where you can network
  • Find wholesalers to buy off of
  • Postcards to absentee owners
  • Run down property look up who owns on auditor website to contact owner
  • Probate sales
  • Bankruptcy people will sell cheaper to get out of debt
  • Divorce couples will sell quickly to finalize divorce
  • Bank owned properties (That is how I got the house I live in now so cheap)
  • Short sales look for investors that do this
  • Foreclosed properties
  • Estate sales

You just need to pick a few ways to find homes you can buy. Get really good at those marketing strategies so you can always have distressed homes to buy.

How much should you pay for distressed property?

You will need to follow the 70 rule. This rule is pretty straight forward especially if you are new to flipping homes. When looking at a home to buy never buy because you like or love the property. You need to buy because the ARV, rehab costs and purchase price align for you to make a profit.

If you want detailed information on the 70 rule check out this article what is the 70 rule in house flipping?

Here is the formula to use.

(ARV (After Retail Value) x .70) – Estimated Rehab Costs = Price to Pay

How to I calculate rehab cost

Rehab cost will be tough your first couple of flips. You have to find a contractor that will give you a fair price and not rip you off. The best thing is to have 3 contractors go through the home with your plan for the rehab and give you their estimates. The bad thing is this could be all over the place with a huge difference in each bid. You will have to call references to see which contractor can do the best job with an average cost. I would not pick the lowest or highest contractor. You really need to do your homework when finding a really good contractor.

Once the have your plans for the rehab then you should get their bids. Have them bid out all work separately. Don’t let them give you a bid that says all work is $40,000. You want each thing itemized. It should be like this:

  • Roof tear off = $
  • Roof repair = $
  • Roof 3 dimensional shingles with ice guards and all flashing work = $
  • Interior paint all rooms and ceilings = $
  • Exterior paint the entire home = $
  • Landscaping plant shrubs, flowers and mulch = $

You have them go through all pricing then you can compare between the three contractors. You can see what each charge so you can learn how to better price out rehab work on future homes.

Over time you will really get good at seeing a home and knowing the rough estimate on rehab. The more homes you see, buy, rehab and sell the better your estimating skills will get.

Where do I get the money to buy the home

You have found a home through doing a few of the marketing strategies listed above. Now you need to go about getting funding to buy then rehab to home to sell.

We discuss strategies on how to find money to buy homes in the article can you flip a house with no money. This article will walk you through the many ways to borrow money.

Here is the list:

  • Find partners
  • Use private money
  • Utilize hard money lenders
  • Use your own money
  • Use a bank (you will have to put in money with a bank)

Where do I find good contractors

The good contractors to flip homes will be difficult to find. If someone is really good they have no time to do your flip they are doing other jobs. You need to really look around asking friends, neighbors and people in real estate about whom to use for the rehab job. You will find enough contractors through networking to get the bids and reward the work.

You will need to check the Better Business Bureau and check online. You are looking for any negative feedback or past issues.

Call all references to see what they think of the company. You can also use Angie’s List to see which companies are the best based on reviews. I go there all the time to see which one ranks the best.

I also use Craigslist under the help wanted if I need to get some work done or to do clean outs. I just had one home cleaned out to get ready for rehab.

Do I need permits for the work

Permits are going to be needed but it depends on the work. It will also depend on your city and what they expect you to do when doing rehab. Some city offices are easy on permits needed and getting them. Other cities are very expensive and permits are hard to get. Here is a list of permits your city may require.

Permits you may need:

  • Load bearing walls moving
  • Moving walls in the home
  • Upgrade electrical box
  • Public sewer work
  • Build on to the home or adding addition
  • Plant trees or take down trees
  • Adding doors or windows to property
  • Re-roof your house may need a permit
  • Changing all the plumbing in the house

Contractor signing a contract

When hiring contractors you need to have a contract in place before they start the work. The contract has to have all the work listed with exact costs. If you do not do this you will run into issues with contractors saying they did extra work that you owe them for it. If everything is in clear writing and they cannot add to work unless you sign off on a change order. If there are no change orders signed by you then you do not have to pay the contractor for extra work you did not authorize. You have to do this and be very strict with them on the work.

Manage the rehab

You get paid the big chunk of money at the end of the rehab if you do everything right because you are managing the rehab. You are responsible for making sure the contractors are doing their job. Every day you must stop by the houses to look at the work to make sure they are not taking short cuts on the rehab. This is not a set the wheels in motion and come back when the rehab is done kind of business.

What does manage the rehab mean to you?

  • Checking work every day
  • Tracking when contractors need to show up to do their work
  • Tracking the project schedule
  • Managing money for project
  • Approve change orders if they come up
  • Work out any disputes on site
  • If a contractor does not show up contact them or get a new one to take their place
  • Make sure work is to code
  • You have to make sure permits were pulled

If you manage the rehab the project should come in on time and on budget. This will create a nice profit for you.

Where to get a realtor to sell the home

Finding the right realtor is the key to selling flips fast. You want a full time broker and one that knows the area you are flipping in. To find the right broker ask around the real estate club to see who they use. The other thing is to drive around the area you are flipping homes and see the realtor signs in the area. You write down the names and numbers then call them all. Do a phone interview with each to see what they know and if they can help you.

Pick a realtor them sit down to talk to them about selling the house you have almost completed.

Finalize the work prepare for selling

You need to get the home cleaned up ready to sell. You may have the contractor clean up the house but it is probably better to hire a cleaning crew. Here are some things to get ready.

  • Marketing ready by realtor
  • Realtor contact all real estate agents let them know a new property is coming
  • House cleaned by professionals
  • Outside work complete
  • Get listing ready for MLS
  • Take pictures and have ready for all marketing material
  • Get house ready to add to website
  • Have for sale signs ready
  • Determine price to sell
  • Determine the lowest you will take for offer

Staging property what to do

You need to get the house staged. I know it cost some money but houses sell quicker staged. If your market is super-hot like in Columbus, Ohio or Las Vegas, NV then you do not have to worry about staging. The house sells in weeks in some of these hot markets. You only need to stage if you think it may be a tougher selling market.

List the property

The property is live on the web and marketing has started. You have done everything we listed above so the selling machine has started. Keep in touch with realtor to see how many showings and the interest level. Check to see if price point with perspective buyers is on point for look of the home.

Profit from selling the home now repeat

The home sold so you have made your profit. You need to pay back the lenders after you get your money. Now it’s time to buy another house and do the process again. The more homes you do the more efficient your flipping empire becomes.

This should be a helpful guide for flipping houses when you are a beginner. Make sure you follow the steps and do not skip anything. One wrong move flipping a home can cost you thousands of dollars.

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