Real estate reality shows like Flip or Flop make it seem as though all you need to successfully flip houses is a little cash and a lot of guts. Well, you do need both of those things, but there's a lot more to it.
If you're just starting out in house flipping, here are the 5 essential rules for success:
House Flipping Success Rule #1: Assess Your Cash Situation
To flip houses, you’re going to need cash. That cash can come from you, a bank, or better yet, other people. If you have money of your own to invest, then you're already ahead of the game. If you don’t have any cash, that's all right too. Although most private investors want a new flipper to have a little bit of "skin in the game,” you can always borrow money from other sources to help you get started.
Although finding investors and raising money for a house flip is an art unto itself, before you even do any of that capital raising, you'll need to assess what you already have available. When you do finally locate your first house flip, you'll have a good idea of how much cash you'll then need to fund the purchase.
A great way to get started flipping houses – especially if you have little money – is to form a joint venture with a partner who has money. If you don’t have the money, the joint venture partner will fund the deal while you do all the work. Although you may not get rich on your first deal, you'll gain something even more valuable – experience.
If you have to split the profits with someone else fifty-fifty, then you still have 50% of something – and that is far better than 100% of nothing at all.
House Flipping Success Rule #2: Build Your House Flip Team
House flipping cannot be done alone – there's just too much involved in a house flip for you to know everything about all aspects of real estate investing. This is why you'll need to build your own team of specialists who you can rely upon for expert advice and expertise to ensure maximum profits.
Some of the members of your team should include multiple real estate agents, a real estate attorney, a CPA, a general contractor, a designer or architect, an insurance agent, a wholesaler, and a private money or hard money lender.
This team will assist you in all the little details of finding, fixing, and then ultimately selling the property – helping you to lock in profits and keeping you out of trouble at the same time.
All these specialists will work together to shorten your own personal learning curve, while helping you make money faster than you would on your own.
House Flipping Success Rule #3: Find an Undervalued Property
Finding an undervalued property in this market can be a challenge. With foreclosure rates down and bank owned property inventory drying up, there is a shortage of inventory compared to just a year ago.
But if you know where to look, this can be a huge advantage for you over your competition. On of the best ways to start finding properties is have people call you to sell their property. One of the best ways that this can be done is through the use of bandit signs. These are the signs you may see around town which prompt people to call a number to “sell their ugly property.” Other ways to find houses to flip include email marketing to property owners, direct mail marketing to absentee owners, and contacting abandoned property owners from town record data.
Your real estate agent can be a huge resource for you when finding properties. All real estate agents can assist you in finding houses that need expensive repairs – and for a house flipper, these are the ideal types of properties to buy.
Click to the next page for tips on how to do the math!