Is 2019 your year? Is this THE year you thrive?
Is it the year you learn how to get started flipping houses and then take action and actually do something about it?
Recently I’ve been noticing a theme with the questions I’ve been getting here on the blog and through Instagram.. they are all related with how to get started in real estate. Whether that be how to get started flipping houses, how to get started buying rental property or just how to get started with real estate investing in general.
In this post I’m going to talk about how to get started flipping houses which is really more like “all the things you need to do before you start flipping houses.” Because really, you can’t just watch an episode of Flip or Flop and decide the next day to start flipping houses.
How to Get Started Flipping Houses
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Education
First things first you need to edumacate yourself. You should be learning all you can about real estate and flipping houses before you jump in. There are all kinds of resources from blogs and podcasts to books and meetings and the amount of free and close to free education on flipping houses is incredible. Whatever you do, do not spend 10’s of thousands of dollars on a guru.
I highly recommend getting involved in the biggerpockets forum and listening to their podcast, it’s truly a great place to learn from real people who are out there doing it every day. A book specifically for flipping houses that I recommend is called Flip – How to Find Fix and Sell Houses for Profit.
But here’s something really important to remember, don’t be afraid to take action because you don’t know it all, you’ll never know it all.
Make a Business Plan
Yes, even if this house flipping thing is going to be your side hustle for a while I still strongly recommend you write out a plan. Your plan should include your “why” (your motivation for wanting to flip houses in the first place) and what type of houses in what type of neighborhoods in what kind of price range are you planning to flip.
Also include how you will plan to fail. Yes, plan to fail. What if you can’t sell the flip when the time comes and your investor wants their money back?
What are your exit strategies? Would you rent the flipped house out, would you refinance it, would you move into it and sell your current house?! Write it all down.
And of course, include your goals – and be realistic. If you’ve never flipped a house in your life and have no background experience, don’t say you plan to flip 100 houses this year – someone considering financing you may laugh you out of the office.
Research the Local Market
Before you start flipping houses, you should do some research into the market you plan on investing in. For example, in some counties near me they charge 1% transfer tax to both buyer and seller and in others they charge 2%… that’s on top of the 1% state transfer fee. (The percent is based on sale price of the home.)
You could get yourself in trouble if you don’t know customary fees like that when calculating costs. On a $150,000 purchase that could be an additional $4,500 you didn’t account for.
You should also research the area in terms of job growth, population growth, crime rate, etc. Usually areas with job and population growth and low crime rates are good areas to invest in.
Find a Deal
These next two items on the list of how to get started flipping houses are arguably similar to the “which came first, the chicken or the egg theory.” Do you find financing first or do you find a deal first?
I personally believe if you find a killer deal the financing will come. For newbies to flipping houses it can be intimidating to search for a deal with no idea how you’re going to finance it. So really do whatever makes you more comfortable. Better yet, work on finding a deal and financing at the same time!
Start with your MLS and begin by analyzing deals. What I mean by that is run the numbers on lots of houses, even ones you probably won’t ever purchase! You just need to practice analyzing deals so it becomes normal and not so scary to do so. Then, when a house you do want to buy comes along, you’ll be ready to analyze and compare. The MLS can be competitive but there are definitely ways to snag a deal.
I also highly suggest searching for an off market deal. Sometimes it’s as simple as driving around, finding a house that looks distressed and leaving a hand written note in the door saying you want to buy their house. It can also be as easy as networking and just simply letting people know what you’re looking to do.
I’ll also to link to an article below I wrote all about ways to find houses to flip (hint, there’s more than just the MLS.)
Find Financing
Financing can be found in a multitude of places. Places you’d never expect there to be money. If you’re serious about this house flipping thing then start talking. Tell everyone you know what you’re looking to do! Ensure friends, family and every stranger you meet all know you want to flip houses.
Start attending REI meetings! Real estate meetups are a great way to find financing, partners and mentors in the real estate investing arena. Everyone there is there for the same reason, to talk real estate. I’ve noticed the longer you attend the more variety of people you will meet. I’ve met hard money lenders, people who want to partner, CPA’s specializing in real estate investing and more. I found my first meetup on meetup.com.
Opening your mouth to anyone and everyone will not only help find financing but chances are someone knows someone in a distressed situation and are looking for your services (services of buying their house.)
Lastly, even though the chances are low for new investors, you can always try bank financing. More often than not they’ll require a large down payment, like 20%-25% of purchase price, since it’s an investment property. (Orrrrr you could try the live in flip strategy I recently wrote about.) There are banks out there that lend to flippers but they usually require a few flips under the belt before they’ll lend.
However (full disclosure, I’ve never done this) I’ve heard from multiple people that they’ve been able to convince a bank to fund their first flip. How? They go to the bank prepared. They have spreadsheets of costs and pie charts of profits. They have a business plan that makes sense and is realistic for their situation. They’ve done their research, educated themselves and thought through the risks and in the end were able to convince a bank to fund their first flip with no experience.
So you never know who might be your next money guy – a family member, friend, UPS driver, neighbor! Just keep working it.
Find Good Contractors
It’s definitely not a good idea to buy a flip and then think of all the contractors you’re going to use. Chances are good you’re going to need a variety of them, from electrical to plumbing to roofing, there are a lot of people you need have lined up.
Like I said above, start talking about flipping houses! Let people know what you plan to do and start asking for recommendations from friends and family for good contractors they’ve used in the past. People love to recommend goods and services.
You could also start researching contractors online and give them a call as kind of a pre-interview. Be up front with them about what you’re looking to do and if they’d be interested in helping you out when the time comes.
You’ll also need to find a whole slew of people to be a part of your team. You’ll more than likely need a real estate agent, a real estate attorney, a good title company and more!
So that’s what you need to know when it comes to how to start flipping houses. There’s so much more to it of course, like marketing, estimating rehab costs, making offers and doing due diligence. But that’s stuff for another day.
Want even more? Check out these posts!
How to Find a House to Flip | 5 Ways You Might Not Know Of
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