Basic Steps to Flip A House
So you’re looking to get into the game of flipping houses? Rehabbing homes is a vehicle to get into real estate. Flipping houses resolves around systems that your create on the front end of projects so you can leverage your team to produce a profit for you on the back end. Whether you are just starting out and decided you want to rehab and sell homes or you have flipped 100 houses, the systems you create for your business will be the backbone of how well your perform. So, let’s get started in discussing some basic steps for your to get involved in this game.
1) Learn Your Market / Know Your Market: Once you decide that you are going to start of rehabbing homes, your first step will be deciding what areas you are going to focus your efforts on. To help you find your target area, first you are going to want to start small and start with an area that is close to you. By starting with a small area that’s close to you, you will be more familiar with the neighborhoods and may have an idea of what houses are selling for here. So find an area you think you may want to invest in and go out and drive the neighborhoods. See what shape the houses are in. After you see what shape the houses are in, see what the houses have sold for in this area. Once again you’re just trying to get a feel for the neighborhood and the market.
2) Join your REI and Begin Reading: Two cheap ways to get your name out and begin learning about flipping houses are joining your local REI and begin educating yourself through books, podcasts and blogs. Find out when your local REI meets and go to the meeting. This will give you a good idea of your competition, where they invest and if they are successful. This may also lead you to a mentor. If you find a mentor, it may cut down on your learning curve a tremendous amount. Educate yourself; begin to learn the basics of the investment vehicle. By educating yourself you will get a feel of what the business entails and will give you a better idea if you want to continue on.
3) Market & Master the numbers: There are several cheap ways to market your business and get the word out on what you are trying to do. First off I would tell everyone that you are in the business of buying houses for cash and trying to help homeowners who are in difficult situations with their homes and you are looking for ways to help them. Next I would start by creating a website. Now days you can create a website for very little money (wix.com) and this will give you credibility and give you web presence (ranking high in searches entails quality content for your keywords- will take time - blog posts). Next I would buy poster board from the dollar stores and begin to hang bandit signs around town.
While you are doing all of this marketing you need to begin studying the number involved in a deal. These numbers may be the most important aspect of your business. The numbers will determine if you have a good deal or if you will pursue a deal. You need to learn how to evaluate a flip (ARV - Rehab Costs - Holding Costs - Profit). Learn how to determine each of these numbers and determine what team members you need to make this process easier.
4) Create a business phone number- So now you have an online presence, you can refer people to your website if they are looking for more information. As you begin putting out more information you are going to need a number for people to reach you at. Simply just activate a google voice number. This will give you a number that investors/ clients/ partners can reach you at without giving them your personal number. This will give you a call to action on all your advertising and an easy way for these people to reach you! (Make sure you have a plan when these sellers begin to contact you- don’t be scared- MAKE THE SALE and CLOSE them!
5) Find the Deal- By now; you should have some sellers contacting you. I want you to evaluate every deal that you get just for practice. Some of these deals will have no chance as sellers will be trying to sell for market value. DO NOT GET DISCOURAGED! This is a process that may take a month, 2 months, 3 months. Getting your first deal takes time but it gets better after that and with more experience comes more deals!
6) Search for A General Contractor- So one of the most important aspects of a house flip is the General Contractor that is on your team. This is a process, finding a good GC who can meet your expectations ( discussed in a previous post ) Find yourself a General Contractor and describe to him what you do and what you expect of him.
7) Financing - If you don’t have the money, you can’t do a deal. I don’t mean you personally have the have the money but if you don’t personally have the money then you better go out and raise it. There a couple of ways to finance deals. You pay for it yourself, get a bank loan, raise money, private/hard money lender or partner with an investor. Figure out what way you will raise your money and take action. You want to have a deal in place before you found the money because if you have a GREAT deal, it will be easy to find the money! The money will find you!
8) Close on the Property- Rehab - Systems! Systems! Systems! While closing on the property, you need to start and complete the creation of a schedule (for your contractors to follow), a scope of work ( for your contractors to stay on schedule), a budget (so you know where you stand with your profits) and a materials list (so your contractors know what they will be using on the job). These tasks are tedious and need to be done to ensure your project runs smoothly. Start creating those systems so the next job will be much easier!
9) Sell the Property for a Profit - To keep this short; you will need to find a qualified real estate agent for this step. Very important to have one on your team. You will list the property for what you determined your ARV was when you calculated your numbers. Have your agent sell the house as quick as possible (if you fixed it right and priced it right, the house will sell)
Conclusion: Do your homework and get out there and take action. Learn the process and begin creating your own systems. Don’t get caught up in learning everything, learn by doing. Follow these steps and you will be given a beginner guideline to take action. You will have to get in depth with each of these steps to be successful.