19 Aug 2013
4 Essential house flipping rules for beginners
I am often asked, “What do I really need to know to start flipping houses…y’know, like a House Flipping 101 guide for beginners?”
If you are just getting started house flipping, there is much to learn.
Can it be done? Absolutely. But there is no one House Flipping 101 course you can take to learn it all. You need to go out and do it on your own, gain experience and learn from your mistakes. If you can shorten your learning curve and avoid the big pitfalls, consider yourself getting your House Flipping 101 education through “on the job training”.
Experience, after all, is the greatest teacher.
Flipping houses takes time to master
If there were a House Flipping 101 course to immediately make you an expert in flipping homes, all us real estate investors would surely do it! However, there is no singular course that will tell you absolutely everything you need to know about this highly lucrative way to make money in real estate.
Real estate investing, especially when flipping houses is not simple. It is capital intensive and is highly cash flow dependent. You need cash to buy and make the improvements, then you hope to get it all back and then some (profit!) to make it all worth your while.
I am not going to kid you, all these factors make real estate investment a risky investment and not for everyone. However, there are some House Flipping 101 suggestions that will help you to shorten your learning curve and get you on track house flipping in a short period of time.
If you are just getting started in house flipping, there is much to learn.
House flipping 101 for beginners
As a new investor, this brief House Flipping 101 guide will assist you in acquiring knowledge to make a profit in the unpredictable yet lucrative U.S real estate market.
House flipping 101 rule #1: Assess your cash situation
To successfully flip houses, you need to first assess your professional and financial resources. You need to know how much money you have to invest on your own or if you need to find investors. Finding investors is an art unto itself, but knowing how much cash you have to invest first is a logical first step.
If you don’t have the money, you can find a joint venture partner or partners to pitch in cash as well. Splitting your first house flip profits with other partners is a great way to start, build some momentum and get your first flip under your belt. Sure, you’ll have to split profits, but its far better to get 50% of something than 100% of nothing.
House flipping 101 rule #2: Build a team
It is highly recommended that you start building a professional house flipping team as soon as possible. This team will help you to find, fix and sell the property – and the collective wisdom and expertise will surely help you reach your house flipping goals that much faster. You simply will not be able to do everything on your own, so enlisting your own master mind group will help you be more productive and work through the eventual problems that will arise far more easily.
Your team can be comprised of real estate brokers, contractors, architects, insurance specialists, accountants and money lenders. All these specialized real estate resources can help you shorten your learning curve and get you making money flipping houses faster than you would have on your own.
Experience, after all, is the greatest teacher.
House flipping 101 rule #3: Find a good house to flip
Find a property in a geographic area you have fully researched. You should be able to buy the house for a low price, rehab it quickly and cheaply, then sell it at a higher price…and obviously make a profit.
Your real estate agent can assist you in finding houses that may not need expensive repairs unless the repairs will increase the equity. Ensure that once you do purchase the house you personally supervise the repairs and make sure they are being carried out properly and on budget. Your profit depends on the cost of the total house, including the repairs. Taking your eye off the ball when doing the rehab is the quickest way to make your profits go up in smoke.
House flipping 101 rule #4: Speed equals profit
Time is of the essence. Speed does not kill when house flipping…it is one of the biggest factors that will lead to profit. The shorter the time you hold onto your investors money, the better your profits will be. So make your improvements fast. Do the job well, but do it fast.
Stay on your contractors using these design rules in order to do the job on budget and on time.
A fast sale in a rapidly appreciating market means more profit for you. Even in slower markets, the same holds true. When doing your house flipping analysis, simply determine the potential selling price after calculating the cost of the house and repairs, plus your monthly carrying costs of borrowing the money needed to fund the house flip to determine your profit.
Timing is important when flipping houses – the faster you sell, the more you make. So manage the property yourself and implore everyone involved to work quickly because profits are on the line.
This article was published by Mike LaCava, a full time real estate investor, real estate investment coach and the President of Hold Em Realty located in Wareham, MA. Mike specializes in flipping houses with no money and runs the website House Flipping School to teach new real estate investors how to flip houses. He has also authored the book “How to Flip a House In 5 Simple Steps” available for free on his website.