more stressful than real estate deals gone bad. Imagine that your financing falls through, or you discover that the house you just bought is infested with termites, or you put the house up for sale and it lingers on the market for more than a year. When your life savings are on the line and you find yourself in a situation that’s completely outside your control, how well do you think you’ll function?
❯❯ Organized: Flipping requires strong organizational skills, attention to detail, and the ability to schedule work for maximum efficiency. If you have these skills, you have an edge over less-organized flippers, but if these skills are lacking or completely absent, don’t give up. Get organized, perhaps with the help of a computer; hire a top-notch assistant; or team up with someone who has the skills you lack.
❯❯ Good with people: The most successful property flippers are approachable motivators with good people skills … or they partner up with someone who fits the bill. Being good with people means you can
• Knock on a stranger’s door without fear of being shot.
• Calmly motivate others involved in the deal to move quickly.
• Empathize with the needs of others and meet those needs in a way that’s encouraging and motivational.
• Be flexible enough to deal with ever-changing situations and quickly develop workable alternatives.
• Build solid relationships with agents, contractors, financial institutions, and others on whom you rely for help.
• Let everyone know how valuable they are.
❯❯ Assertive without being bossy: You need to know what you want, ask for it, and don’t settle for anything that’s outside your comfort zone.
❯❯ Good with numbers (or a calculator): Flipping for profit requires rudimentary math skills – addition and subtraction with a little multiplication and division thrown in for good measure. To keep your bottom line black rather than red, you simply have to make sure that you sell the home for more than you invest in it. Loan calculators and other useful tools are readily available in personal-finance programs, such as Quicken, and on the web. (Visit bankrate.com, for example, and click Calculators.)
❯❯ The ability to handle rejection, failure, and success: Flipping houses has its ups and downs. You need to be able to ride the waves:
• Rejection: Rejection can come in the form of denial for a loan, a buyer or seller backing out of a deal, investors or partners abandoning you, or nobody showing up at your open house.
• Failure: Even the most experienced and successful flippers encounter setbacks. They may underestimate the costs of repairs and renovations, underestimate the time required to sell the house, or even have to sell a property at a loss.
• Success: Success comes with its own set of problems. You may find a great deal and talk yourself out of it. You may put the house on the market, receive a good offer the first day, turn it down waiting for a better offer, and never get that better offer; I know how hard that is to handle. Or success may lead to overconfidence that results in failure.
We (Ralph Roberts and company) discovered a fantastic foreclosure property – a $2 million beauty we could get for a cool $900,000! Although the owners, whom we refer to as Mr. and Mrs. Rose, were going through a divorce, they seemed willing to work with us at first. They even convinced us to let them stay in the house while we were rehabbing it. (Letting people stay in the house is always a bad idea. We agreed to this to get the deal done, but when you’re flipping a house, you want to close on it only when it’s vacant and “broom clean” and, in the case of foreclosures, the redemption period has expired; see Chapter 8 for more about redemption.) Mr. Rose lived in one half of the house, and the Missus resided in the other half.
As soon as the contractors showed up, the War of the Roses commenced. Mrs. Rose declared certain areas of the house to be no-work zones, and these zones changed daily. She tried to seduce the contractors, and when real estate agents arrived to show the house, she called the police. During the rehab, the Roses’ son was caught doing drugs in the house.
Mrs. Rose moved out, only to be replaced by Mr. Rose’s girlfriend. When the contractors returned to work, they found the girlfriend at the top of the stairs, dressed only in her nightie, drunk and in a jealous rage. She proceeded to fall down the stairs, shedding her wig along the way. By the time the Roses cleared out, the place was completely trashed.
We finally managed to take possession of the house, complete the rehab, and place the property back on the market. We were willing to sell for $1.8 million, and when we got our first offer for $2.2 million, we were ecstatic, but we weren’t out of the rose bushes yet.
During negotiations we found out that the instrument the buyer was using to pay for the property qualified as an illegal use of treasury bonds. We informed the FBI, which set up a sting operation to nab the bad guys. The fraudsters showed up three hours early, discovered the sting, and split town.
We eventually sold the house for $2 million and netted a $250,000 profit for about a year’s effort. Not bad for a year’s effort, but it wasn’t the quick and easy money we had expected.
Every job requires a collection of specialized tools. For flipping houses, make sure you have the following bare essentials:
❯❯ Flashlight, because you never know who or what is just around the corner or in the crawlspace – it could be someone in a nightie or pajamas, or it could be an animal.
❯❯ Digital camera for taking photos of properties and before-and-after pictures of repairs and renovations.
❯❯ Calculator for crunching numbers.
❯❯ Day planner or tablet for jotting down names, addresses, phone numbers, and appointment times and locations.
❯❯ Smartphone with plenty of useful apps, including GPS, a general-purpose calculator, a loan calculator, and a calendar. Realtor.com has an excellent app for iPhone, iPad, and Android (visit www.realtor.com/mobile). Google Maps is useful for scoping out a property, and Zillow has an app for doing a quick price check on a property (although Zillow property values aren’t the most reliable).
❯❯ Reliable transportation that’ll get you to and from the job site as well as any errands in between.
❯❯ For Sale signs (if you’re planning on selling the home yourself).
