drive your success — being a curious, friendly face is encouraging to both sellers and buyers and can help you secure a fair deal. When you’re dealing with sellers, especially, it can make them more open, enabling you to find out more about a property before you make an offer.
Devising a Reliable Flipping Strategy
No two flippers have the same strategy. Some choose to live in the house they flip, and others find that strategy to be too stressful. Some flip the house they live in every two or three years to take advantage of a lucrative federal tax exclusion (see Chapter 23), and others flip a house once every month or two for quick profits. Many investors focus on a niche market, such as foreclosure properties, HUD properties, or For Sale By Owner (FSBO) homes.
Cash or financing to not only purchase the house but also cover holding costs and the cost of repairs and renovations (see Chapter 4 for more about financing your flips)
A plan for repairing and renovating the property (such as buying low, applying makeup, and selling high, or living in your flip while you renovate it)
A realistic estimate of the costs of repairs and renovations and the monthly expenses for holding the property
A schedule for completing the project
Reliable contractors who can begin working on the property immediately
A date on which you plan to put the house back on the market
Plan your flip at least as carefully as you would plan a two-week vacation. Other chapters in this part can help you lay the foundation for a successful flip.
Building an All-Star Team
When you’re gambling with more than $100,000 of your own or someone else’s money, learning by trial-and-error can be catastrophic. A safer way to develop the skills and foresight needed to reduce costly mistakes is to learn from others. Develop your own house flipping team and rely on the following professionals to guide and educate you:
Real estate agent
Financier/lender
Accountant
Title company
Appraiser
Home inspector
Real estate lawyer
Contractor
In Chapter 3, I describe the role that each of these valuable individuals plays on your team, and I provide some criteria for selecting the best of the bunch. I also devote an entire chapter (Chapter 13) to building and managing a rehab team.
Finding and Buying a Flippable House
Finding and buying a property is a four-step process:
1 Scope out a fertile neighborhood — often an area with homes that are at least 20 years old.See Chapter 5 for details.
2 Zoom in on a dontwanner — a distressed property that the owner obviously doesn’t want or can’t afford to keep.A distressed house usually has a distressed owner. See Chapters 6, 7, and 8 for various ways to find distressed properties. (Landscape maintenance is typically a good, early indication of a distressed property.)
3 Research the property carefully and then calculate the most you can pay for it and still earn a decent profit.You should be fairly certain that you’ll earn at least 20 percent for your trouble. See Part 3 for more about researching and evaluating properties and calculating a maximum purchase price.
4 Haggle with the seller to purchase the house at a price that virtually ensures you’ll profit from the flip, as I explain in Chapter 12.In some cases, you won’t haggle with sellers but bid at an auction instead; see Chapters 7 and 8 for details on finding and buying properties in foreclosure and other special markets.
Rehabbing Your Fixer-Upper
Buying a house to flip is like buying a beat-up antique at a garage sale: You got the house for a bargain because it needs work that the seller hasn’t the time, money, or desire to take on. By cleaning up the joint, fixing whatever is broken, and making a few renovations, you can bring the property up to market standards and sell it for its full market value. In the following sections, I walk you through the types of repairs and renovations you can make.
Planning repairs and renovations
Repairs and renovations require careful planning and execution to keep them on schedule and within budget. Before you begin, prioritize your repairs and renovations so that you know what’s most important; I give you all the tools and tips you need in Chapter 14. Invest your time and money in the repairs and renovations that promise the most bang for your buck — and then if you need to trim costs, you can skimp on the less important stuff.
