style="font-size:15px;"> ❯❯ Ability to follow instructions: You don’t need to know everything about flipping houses to get started, but you do need to know how to follow instructions, including those I provide in this book.
❯❯ Ability to perform basic math: Basic math skills are essential when you’re comparing financing options and crunching numbers to gauge how much profit you can wring out of a house. If you’re not good with math, you at least need to know how to use a calculator.
❯❯ Organizational skills: When you’re renovating a property, you need to be able to coordinate contractors and material so the work gets done as efficiently as possible. Remember, time is money.
❯❯ People skills: Being able to work with people and resolve any differences is key in many aspects of flipping, including convincing people to loan you money, negotiating lower prices for property, and managing contractors and work crews.
❯❯ Sticktoitism: Flipping houses involves failure and disappointment. Those who succeed don’t give up.
See Chapter 2 for additional guidance in deciding whether you have what it takes to flip houses.
No two flippers have the same strategy. Some choose to live in the house they flip, while others find that 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), while 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 not only to purchase the house but also to cover holding costs and the cost of repairs and renovations
❯❯ 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. Chapters 3 to 5 help you lay the foundation for a successful flip.
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
❯❯ Contractors
In Chapter 4, 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.
1. Scope out a fertile neighborhood – often an area with homes that are at least 20 years old.
See Chapter 6 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 7 to 9 for various ways of finding distressed properties.
3. Research the property carefully and 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 that you’ll profit from the flip, as I explain in Chapter 13.
In some cases, you won’t be haggling with sellers but bidding at an auction; see Chapters 8 and 9 for details on finding and buying properties in foreclosure and other special markets.
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 do. By cleaning up the joint, fixing whatever’s broken, and doing 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 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
