For every endeavor in life, it starts with a “beginning”. Rarely is there immediate success. If there is, it is often short-lived. Anything worthwhile in life, whether personal or business, has to be built on a solid foundation in order for it to grow and become strong and successful. Growing a business involves an enormous amount of hard work, learning and growing personally. It's a progression. Flipping houses can be very risky, but if properly educated, can be very rewarding. Whether you’re thinking of flipping your first house or your one hundredth, hopefully, there is something here that will be helpful to you.
Let’s talk about the fix and flip survival kit for all investors.
Having a healthy list of leads is vital to the health of your business. Nothing else matters. You may have the best marketing, most valuable service available, but if you have no leads, you have nothing. Lead generation is very important. No matter how good you sound or the value you bring, if you aren't in front of motivated sellers, you're not going to get properties under contract and won’t have anything to flip. Become an expert in acquiring discount property leads. Avoid houses off the MLS that are full price. Learn to buy houses at a discount in order to flip houses. Don’t spend all of your marketing budget at the very beginning. To be good at marketing you have to be consistent. If you see something working, keep at it. It is best to try any marketing strategy for 3-6 months to know if it is working. Find some things you can commit to for 3-6 months and be consistent. Some examples are car decals, contacting contractors, craigslist, etc. Contractors have a wealth of knowledge of houses that need repair. Not every person has enough money to do the necessary rehab/repair work and may just need to get rid of the house. Real estate agents have leads.
In marketing, you have to be patient. It takes time to develop a lead. Just because you get a “no” right now doesn’t mean it’s “no” forever. Keep following up and you’ll get deals.
How to Build a Team
You can’t do this alone. You need people to help the business run efficiently and be successful. FInd those who are an expert in their field and glean from their expertise. Build relationships with your finance team, CPA, Once you find people, make it worth their while to be a part of your team. You know the saying, “Teamwork makes the dream work”. We hear this phrase so often, it’s easy to dismiss and ignore. Yet, it has an incredible truth. Don’t try to be a “one man show”. Build a team that believes in your business. Provide value to them and they will reciprocate that to you.
Getting Valuable Education
We all know that education is the key to every type of success in life. Always be learning. Expensive education doesn't mean it is always the best education. You don’t have to spend thousands of dollars to learn. It’s not necessary to speak with the most successful person in real estate. Find someone in your area that has made deals.
You don’t have to get all of your education before you start your business. Spend money on learning along the way. Learn as you grow. Grow as you learn. Definitely, invest in getting a solid business plan and be a part of a mastermind. Your network is your net worth.
Have a plan to invest in your business. Lenders will take you more seriously when you take it seriously. Be prepared when you meet with the lender. Have some specific goals. When you make a deal put some of that money away for business growth. Plan your work and work your plan. If you don’t plan your business, it will not run efficiently. When it’s not running efficiently, there is a consistent loss of momentum and growth. In turn, there is a loss of profit.
Picking the Right Neighborhood
Target the right neighborhoods to buy the houses to flip. Be careful with the area you choose. The better neighborhoods have more buying demand and there is less risk involved in these areas. Just because it's a great deal doesn't mean its a good deal to take.
When starting out in the house flipping business, pick a normal type neighborhood, do a normal type of renovation, and do a simple flip.
Once you get more seasoned, then branch out to other types of neighborhoods.
Buying Houses at Investor Prices
When buying a house as an investment, you have to think differently from a house in which you would buy to live. For example, If you can find a house for less than $225k, get it for half of that and it needs only a fair amount of work you’re probably going to do ok. Sometimes we complicate things unnecessarily.
Buy houses that need work, and always think “half price homes” as the way to invest…. Buy houses with a lot of wiggle room in negotiating the price.
I recommend those doing their first house flip, to focus on those houses that just need cosmetic work. As you flip these type of houses, learn along the way and become a master at buying houses at investor prices.
Scope of Work
What’s your rehab plan? Come up with a scope of work on every house so you can stay on budget. The rehab plan should be a team effort.
Get plenty of bids from different contractors. Be on sight and hands-on during this process. Walk the house with the realtor and contractor. It’s the realtors’ job to sell, the contractors’ job to tell what it will cost to rehab it, and It’s my job to deliver value. The contractor can be an advisor in his specialty. Let those within their expertise do their job and help advise you. By collaborating together, the end result gets the best price, keeps the rehab within a reasonable budget for that particular neighborhood and delivers a valuable product to the customer in the end.
Get Everything in Writing
When first starting a business it’s easy to let your personal feelings get in the way of actually “running a business”. Learning to treat your business like a business is so important. Be professional from the very beginning and get everything in writing. This is not a selfish motive for you and your business. It is a guarantee for you and the people with whom you work. Getting everything in writing helps keep everything on track and accountable.
How to Pay Contractors
Hire contractors that can get the work done on time. Be sure they are trustworthy. Stay honest with your taxes and keep thorough records. Get receipts for everything so you can claim it all at tax time. Be a legitimate business. Hire a CPA that can help you.
Sometimes the less you rehab the better. When you start rehabbing to the extreme, it can result in not making enough profit from the rehab. Before you start rehabbing with all the modern upgrades and details ask yourself, What is the value added from the rehab to this house? Is it going to yield a good return? Become familiar with the neighborhood the house is in. Use your realtor to compare what houses have sold for in your neighborhood. This will help you decide a reasonable rehab price for the house in that neighborhood.
Your thinking is the most important thing in your survival kit. Whether it's your first flip or you've done a ton of them, your thinking is vital to a successful business.
Become a reader to learn your craft. Everyone has to start at the beginning, but you don’t have to stay there. Reading can allow you to learn and grow in your business field.
What are your long-term goals? Big thinking yields big results. Dream big!! Make some specific goals and once those specific goals have been made, bring them to reality by working at those goals every single day. If you aren’t good in a particular area of your business, read, read, read!
If things are not going the way you want or something isn’t working, change your habits. Make the changes necessary to be successful. Don’t waste your time. Build something that will yield results. Make it your goal to grow every day!