House flipping can be very lucrative, but as a beginner, during these current real estate conditions, you have to flip houses right, or you could easily lose your shirt! There is no room for big mistakes in this environment. You're about to discover how to flip houses the right way.
Find the Right Property
There are 5 principles you should follow as a beginner to ensure your success in house flipping. The first principle is to find the right property. Buying right starts with what you buy and where you buy.
Foreclosures: A lot of new investors think that foreclosures are the low hanging fruit. But foreclosures bring a lot of competition and involve considerable risk. You don’t want to start here. In fact, we don’t ever recommend you show up to auctions. Instead pursue these properties while they’re still in pre-foreclosure and we have a several trainings on how to do that you can check out.
MLS: Another place many new and seasoned investors look for properties is on the MLS. Again, this is where there’s a lot of competition, which results in paying a lot closer to market and leaving little room for you to be profitable. You want to focus on off-market deals. That’s where the real opportunities are, and it’s what we specialize in at Freedom Mentor.
Town Houses/Condos: I’d also steer clear of condos and townhouses, or at least be very cautious. Those properties come with a lot of potential issues with common areas and assessments and can be a nightmare if you’re not prepared.
Where To Focus
You want to focus on the properties that are in the most demand and those are single family homes. They’re the bread and butter of what we deal with as house flippers. There are plenty of single-family homes in every market, but right now, some markets are struggling, while others continue to thrive. So, learning to analyze your area to understand what is desirable and where to do deals, while staying away from the less-desirable areas, could be the difference between success and total failure.
As we walked through in my last video Is Now a Good Time to Flip Houses?, you want to identify safe and affordable areas, below the median sales price. That can be tricky, but that’s part of why our apprentices come to us for mentoring. They want to be sure they’re targeting the right properties, in the right areas and working directly with the seller.
Make the Right Offer
The second principle is making the right offer. Hopefully you’ve followed the first, but if you don’t know how to make the right offer, you’ll waste time and money. To begin with, every deal is different. Therefore, you must learn to recognize seller motivation and the key ingredients that will make a house flip possible. It’s not a one-size-fits-all formula! You of course have to buy at a discount, and you’ll be making mostly cash offers, but having the ability to work with creative terms is a vital tool in your toolbox. Our team has mastered every detail after closing thousands of creative deals. You want to present the right offer or offers to your seller, negotiate the right terms, and secure the deal. For more on how to make the right offer, check out Phil’s training on the Art of Getting Offers Accepted.
Complete the Right Diligence
Once you have the right offer locked in, the most critical principle is number three, completing the right diligence. We talk about this in so many of our trainings because due diligence will absolutely make or break your success! It’s NOT optional. You have to be thorough in every aspect to understand the property’s title, condition, value, insurance, and the HOA. We walk our apprentices through each and every detail, so they don’t lose BIG money! You want a mentor that has been there before, to guide you through all the potential landmines.
One such example is an apprentice who closed on a deal last year. He found out the property had a sinkhole because it was keeping some buyers from obtaining insurance, and of course scaring them away. As you can imagine, that’s a pretty serious obstacle to attracting a buyer! But we were able to track down a previous insurance claim, then locate an engineer’s report, and with the right insurance he was able to still flip the property to a confident buyer that loved the home. He also had to manage a roof claim post-closing, but we were successful and completed the house flip with a solid profit of just over $24,000. So again, the right due diligence and guidance is critical.
Identify the Right Funding
The fourth principle is identifying the right funding.
Fund It Yourself: Many traditional investors tie up a lot of their own cash, which is risky.
Bank Loans: Or they use bank loans, which involves a slow, lengthy process, and a lot of hoops. Funding with traditional loans will also bring limitations to the number deals you can do, as well as to the speed in which you can build your success.
Hard Money: If you’re just beginning and have limited cash and credit, an alternative is hard money. Those are very expensive loans and still involve plenty of hoops, but they certainly have their place for the right deal, although not as often for quick house flips.
Creative Terms: If you want to maximize your opportunities, you want to master creative terms. This can allow you the leverage you need to do lots of deals, even simultaneously, without risking all your own cash and credit. Again, it’s such a vital tool as a house flipper, and a game changer once you master these skills. If you’re just beginning in real estate, check out Phil’s video Creative Financing Comparison to learn more about creative terms. It’s a great place to start to find the right funding for house flips.
The Right Way to Sell
The final principle for house flipping success is to sell right. You always want to sell for the highest price you can, as fast as you can! If you’re working with a property that needs a lot of repairs, you may be tempted to take on a costly rehab to maximize your profit on the deal. But you’ll often hear from our team, that rehabbing is rarely the best move. Avoid that massive headache and flip the property to a rehabber.
The key is to know where to market and where to price to move the property fast. Now if your property is in livable condition, you may be able to target the retail market. However, it’s important you make the right adjustments to attract the right buyers, and again, sell the property quickly. I can’t tell you how many times our apprentices hear from agents that it will take 2 months, or 3 months, or even 6 to sell a property in that local market, and every time they’re dumbfounded by how we’re able to lock in a buyer within a week. That’s the power of selling the freedom mentor way. Check out Phil’s training on the Best Way to Sell a House Fast in Any Market to learn more.
Every Successful House Flipper Has a Mentor
When you flip houses the right way, you can make a lot of money in real estate and avoid big mistakes that could cost you tens of thousands of dollars. We’ve spent 2 decades mastering these principles, and guided countless beginners in real estate through all the details, specific to their local markets, to transform them into money making machines! If you want the very best in your corner, helping you every step of the way, consider applying to our Apprentice Program where myself, Phil, Devin and the rest of our team will guide and train you through this incredibly profitable endeavor of flipping houses. Text FREEDOM to 305-315-8030 or apply to our Apprentice Program here: Freedom Mentor Apprentice Program.
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