|Net Profit In Cash|
You can go to seminars and buy all the books but the best way to learn to flip a house is to just do it. It may also be the most costly. I know someone that lost $70,000 on his first flip. I made $100,000 on my first flip. Correct information is key.
WHY DO YOU WANT TO FLIP A HOUSE?
Just like anything else in this world, it takes hard work to go through this process. If you are thinking easy money, get rich quick and easy then you may as well take up crocheting. Flipping a house is not for the faint of heart.
On the other hand it can be exhilarating and a real high. If you love to solve problems this is definitely something that you would love!
WHAT IS YOUR BUDGET
Are you paying cash? Do you need financing? How much cash do you have to spend on repairs? If you have the cash and deep pockets then you may just be doing this as a hobby. If you count pennies like most of us do, you need to determine how much cash you have to put into the project. That will determine what price range you will be in.
|Your Big Why|
ARE YOU THE GENERAL CONTRACTOR (GC) OR THE GOPHER?
When I built my first house years ago, my father did most everything. But I was called the GC (General Contractor) because it was my house and I knew what I wanted. I was also the gopher. It was me who went to the Home Depot style store (Home Depots weren't born then)to pick up supplies and grab the beer on the way back.
My father told me from the beginning that there was one thing he would not do. He would not mud the Sheetrock seams. So he showed me how and I did the entire house.
|The Boss And The Beer|
So what is your job title going to be? You must decide this first so you will have your plan in order. If you are going to do the work yourself ask yourself if you have the time? Are you already working a full-time job.
Remember, too, that your uncle the plumber and brother the roofer may not actually show up. Contingency plan. Every day that goes by is costing you money--taking away from the bottom line net profit.
THE MAGIC FORMULA
As a Realtor, I get emails from other Realtors with headings like "great investment" property" "perfect for a investor" and those sort of things. I always like to look at the details and then just shake my head. There is a specific formula that you use to determine what is a good investment.. It isn't rocket science but it isn't exact either.
|It Can Sure Feel This Way|
These are the things you must know:
- After Repair Value (ARV). You will need a Realtor for this unless you have a real sharp handle on the market.
- Net profit--this is the number that you want to take home
- Carrying costs--every day you own the house it costs you money--mortgage payments, taxes, insurance, utilities
- Cost to repair--this can be really hard to figure out. Do an item by item number.Don't forget permits and city inspections. I always add in an "oops" category for things I missed or forgot about
- Marketing to sell--Realtor fees, closing costs, buyer closing cost help
- How much do you have to buy the house for?
That is the magic formula.
Since I can be math challenged, let me use round numbers..
Net Profit $10,000
Carrying Costs $5000
Cost to repair $15,000
Marketing/closing costs $10,000
According to these numbers you need to buy the house for $58,000. Do when you see a house that needs some work on it does not mean it is a good deal.
FIND A PROPERTY
I believe that this is the hardest part. Unless you advertise or have a big name, you are going to have to do some research. At the beginning you may want to find a Realtor that has done it before to help you. :-) Other ways to find houses are to ride through neighborhoods, find empty houses, and track down the seller to see if they want to sell. You can know on FSBO doors. Word of mouth.
Many people think that foreclosures are good deals. That is not always the case. They don't always fit the formula. Click here to get a list of HUD foreclosures.
If you would like more information and a "sit down" I would be happy to sit with you and try to help you get started.
Keller Williams Realty
3955 S Soncy Amarillo TX 79199