Flipping houses for a profit is harder than many people think. There are so many reality TV shows glamorizing the process of fixing and flipping, but in reality, flipping is a business. Just like any other business it requires hard work, strategy, and knowledge.
We are always working to ensure that our borrowers are as educated and successful as possible. To help accomplish this, we’ve asked 14 of the top experts in the real estate investing space to share tips and tricks that have made them successful over tshe years.
Read this article to gain real actionable insights into the processes and procedures of some of the very best fix and flippers in the country!
With each quote, you’ll find tweetables from each expert. If one expert’s tip really resonates with you, thank them by tweeting their advice. They’ll appreciate it, and so will your followers!
What advice would you give to a fix and flip investor?
Bill: “Besides overpaying for a property, one of the biggest mistakes I see investors making when getting into flipping homes is using the wrong real estate agent. If you want a great experience as a real estate investor you should have someone on your team that can be a second set of eyes when purchasing flips. A seasoned realtor should have the skill set to be able to analyze an appropriate purchase price along with what the home can sell for after renovations.
The second skill the agent needs to have is a strong grasp for marketing. The agent needs to communicate effectively exactly what has been done to the property. The quality of the contractor’s workmanship along with features and amenities should be emphasized.”Have someone on your team that can be a second set of eyes when purchasing flips Click To Tweet
Justin: “After coaching and working with some of the nation’s top house flippers and wholesalers it has become pretty clear that there is a key differentiator between those who are highly successful and those who are just getting by.
- Most investors “look for deals” and high level investors create systems to bring deals to them.
You will never hear a high level investor say they “can’t find any deals”, truth is they aren’t really even “looking for deals”. Their business is set up in a way where they have a constant and consistent lead flow. They have systems and people who sift through these leads for the gold with an automated follow up process to help. They run their business through KPI’s and a dashboard. Their goal is not to “find the next deal”, but rather to continue to empower and improve their teams and systems in their business.
- High level investors surround themselves with and learn from other high level investors. Free podcasts, books, forums, and REI clubs will only get you so far. In fact, often hanging out with all new or struggling investors after a while can really slow you down.
I’m not saying you shouldn’t participate in any of these during your career but it’s important to know that if you want to get to the next level then you need to hang out with higher level players.
The level of investors you surround yourself with is usually the level to which you will rise in your success. High level house flippers and wholesalers recognize the importance in investing both time and money to surround themselves and be able to be coached by these kinds of groups. This is what keeps them on top and able to always implement the best systems to stay ahead of the game while continuing to prosper in a business where many others struggle just to get by.”Most investors look for deals. High level investors create systems to bring deals to them Click To Tweet
Paul: “For those of you who are thinking about taking the plunge, allow me to offer some advice. Understand that finding, fixing and flipping a house is not an activity, it is a business. As such, approach it as a business person would approach any business – with a plan that is written and read by at least several other people. Your plan must describe how you will:
- Locate a house in your target area that is offered at a discount of at least 20% to the prevailing market.
- Determine what the house needs with respect to repair that will allow it to be sold at a price that will earn you at least a 15% return on total deal cost.
- Find a General Contractor that will manage the repair process at your budget.
- Find a Realtor who will give you consistent and unbiased access to knowledge about the value of homes in your target area. It will not necessarily be the case that your realtor will be the same for purchase as for sale.
- Find an Investor, and/or a Lender to help you capitalize the transaction if you do not have the necessary capital.
- Determine what return on capital your investor will require and/or what a lender will require with respect to interest on their loan. These costs should be considered as any other cost of the deal to determine total deal profitability.
- Build a budget, in a spreadsheet, that will list all your costs and calculate your return post sale.
Writing this all down can be a terrifying. I know, because I did it once and it wasn’t pretty. But, it was, and is, an essential exercise as it will show you what you know and what you do not. Any business is ultimately about making money, and those that proceed with knowledge, and a written plan will make money more frequently, and more consistently, than those who do not.
One last piece of advice. For less than $10 on Amazon, you can buy a book that will address the above. Find it, buy it and read it.
Good Luck!”Understand that finding, fixing & flipping a house is not an activity, it is a business. Click To Tweet
Joshua: “Success with house flipping is all about three things:
- Knowing how much the house will be worth at the end (After Repair Value, aka “ARV”),
- Knowing how much to spend fixing it up (the Rehab Budget), and
- Making sure you buy the property at the right price.
Working with a great real estate agent who understands the market can help you with #1 and #3, and a great contractor can help with #2. After that, it’s all about managing all the moving parts to ensure you don’t go over budget and you get done on time!”
Success with house flipping is all about managing the moving parts Click To Tweet
Tom: “We spend most of our efforts analyzing the deal up front. The old cliché “you make your money when you buy the house” really stands true. Spending the time to really look at the recent sales in the area and studying their finishes will determine what your flip should sell for after you are done. Only remodel to match the comps and don’t over improve. Like appraisers, we only look at sales 6 months back and within a half mile radius. In rapidly appreciating markets like we are experiencing now, it’s imperative to also consider the pending listings.
Once you are comfortable with an accurate exit price, it all comes down to having a solid renovation budget. If you don’t have experience in this area, get good help! Then we start backing out our numbers from the After Repaired Value exit price. We subtract renovation costs, carrying costs, selling costs and our profit. If you are using hard money you must subtract these financing costs as well. Most investors shoot for a 10% minimum Net ROI.
Don’t cut corners on the repairs and always disclose everything you know to your new buyer. There is always risk involved but if you follow this guideline you should limit your exposure to a potential unprofitable flip.”
Mark: “Make sure you calculate all the costs! There are many more expenses than just the repairs. You will have:
- Carrying costs: insurance, utilities, taxes, HOA, maintenance.
- Buying costs: inspections, closings fees, recording fees.
- Loan costs: appraisal, points, interest, doc fees, flood certification fees.
- Selling costs: agent commissions, buyer closing costs, recording fees, closing fees, title insurance, inspection requests, appraisal repairs.
The repairs will always cost more and take longer than you think! When you rehab a house you will find things that need work that you did not know about. This will add time and money to the budget. You will also have contractors who over promise. Be prepared to hold houses longer than you think and pay more for repairs than you estimate.
Do not force a deal. The numbers will tell you if a deal is worth doing. Do not bid too high just because other investors are pushing their numbers or hope that prices will go up when you are ready to sell. Base your numbers on current market prices.
Do not list your home for too much money trying to make up for increased costs. The market does not care how much money you spent on repairs, and listing too high will cost you even more money.”Be prepared to hold houses longer than you think & pay more for repairs than you estimate. Click To Tweet
Sean: “Build Professional Relationships to Find Off-Market Deals.
The most challenging part of flipping houses in today’s market is finding the deal. I recommend investors build relationships with attorneys, paralegals, and mortgage brokers as a great way to get exclusive off-market deals. Identify these professionals in your target market, connect, and nurture the relationship. This creates win-win-win solutions when they have clients in distressed situations. It makes these professionals look good and may generate business they would have otherwise lost out on. It helps the client, and you can get paid for providing a valuable service to those in need. These sources can yield highly motivated sellers, who already trust you when you are introduced, while avoiding the pain of other deals which pitch investors against each other in bidding wars.
Be wary of wasting too much on wooing these lead sources with free lunches. Especially at first, and until you know you really have a shot at their business. Do start with a professionally drafted script, and know what you can bring to the table in value. Remember that one of the best ways to get referrals, is to give one first.”Build Professional Relationships to Find Off-Market Deals. Click To Tweet
Marty: “The most important piece of advice I can offer someone thinking about fixing and flipping houses is don’t treat it like a hobby. Hobbies are expensive.
Fixing and flipping houses is a business. And like any smart business owner, you need to understand supply and demand in your market. More importantly, you must know what the customer (homebuyer) wants.
A lot of people get into the fix and flip business because of what they see on HGTV. Or, they think because they know how to install tile and paint that rehabbing houses is easy.
However, there a number of other skills required. You must be a good negotiator, and an even better time manager, budget manager and people manager.
It doesn’t really matter how good you are with a hammer and skill saw if you don’t keep to a schedule and budget. You’re not doing this for fun, or charity. It’s to make money. And profit is difficult to earn if you overestimate the value of your property after the rehab is complete, and underestimate the repair costs.
Immerse yourself in the business of fixing and flipping houses. Read. Listen. Watch what other fix and flip investors in your real estate market are doing. There have never been more free resources, in books and online, available for you to learn how to fix and flip a house successfully.
To win, take advantage of this information, and take your business seriously.”Doesn’t matter how good you are with a hammer & saw if you don’t keep to a schedule & budget. Click To Tweet
Doug: “As active fix & flippers and wholesalers in this current market, we spend a LOT of money to get leads. More leads = More deals! Anyone who does this knows that those leads are extremely valuable! They are not only valuable because there could be a potential seller ready to sell you their property, but because you have literally spent hundreds, thousands, or even tens of thousands of dollars to get the phone to ring to create that lead. The lead is gold, so treat it like that.
The truth of the matter is, you aren’t going to be able to come to an agreement or make a “deal” with the vast majority of your leads during the initial negotiation. This is normal. The seller just likely isn’t quite motivated enough. However, time and circumstances can change a seller’s motivation and they very likely will be motivated to sell their house at some point in the future.
If you hope to be the investor that buys their house when they are ready to sell then you must make sure that you are FOLLOWING UP with your leads! Don’t take your follow-up lightly! Create the systems you need to continue to connect, reach out to, and follow-up with your cold leads even when you think there is no point. Last year 25% of our deals came from extended follow up. You won’t regret it, by doing relentless follow-up, your deal flow will increase!”Last year, 25% of our deals came from extended follow up. Click To Tweet
Stacey: “When searching for a potential fix and flip property, make sure to take environmental issues into consideration –they can make or break a deal. If a house has an underground oil tank, do yourself a favor and do a tank sweep in case there is soil contamination. If there is, the deal may not be worth it. Soil remediation is pricey and will definitely affect the resale value of the property. Also, if the property is in a flood zone, you must factor in additional holding costs in case it takes longer than you expect to sell. Properties in flood zones require flood insurance and can burn a hole in your pocket if the property sits for too long.”Environmental issues can make or break a deal Click To Tweet
Eric: “Some people think that there are multiple steps needed to starting in real estate. In reality, there is only one. Your first step should be to start networking.
Regardless of how much you read online or in books, nothing will replace the knowledge gained by a one on one conversation with another investor. The best way to earn the valuable time of an experienced investor is to offer to buy them food.
Just about everyone will agree to have lunch or dinner if you’re buying. You can buy an hour of time with someone for $20-$30. To pay for that same hour, you may pay a consultant $200+. It’s a great value for the money! So, get out there, start networking, and follow up with the people you connect with and offer to take them to lunch!”Nothing will replace the knowledge gained by a 1 on 1 conversation with another investor Click To Tweet
Sharon: “In a lot of areas, investors are having a hard time finding properties to rehab. This is especially true for properties that will typically be sold to first time home buyers. These are entry level homes. This particular price point is where most investors will be working so it will be harder to find deals.
One way to solve this problem is to move up one notch in the type of house you rehab. Move out of the entry level property and into the “move up” property. It’s not a huge jump for the investor in their rehab costs, but there is a whole lot less competition from other investors for these houses.
When you are rehabbing your house, always do an above average job. Nobody likes average or ordinary. There are a lot of upgrades and finishes that won’t cost you a whole lot of extra money, but they will give your property a lot of “wow”.
My other tip has to do with selling your rehabbed properties. The best thing you can do to is to invest in staging your properties. They will sell faster and for more money every time, because they look great and people can imagine themselves in the home.
It’s not that hard to set yourself apart from the competition with a little extra effort. What does that mean to you? More dollars in your pocket.”When rehabbing your house, always do an above average job. Nobody likes average or ordinary. Click To Tweet
Ed: “In my experience, the most important thing is to know what the area can support in terms of a final rehabbed property. You need to do your research on what properties are selling for and what they look like from the inside out. What features do they have? Do they have granite countertops? Hardwood floors? It’s important to match what the market dictates in terms of renovations. So many people buy properties because they are beat up and need rehab not realizing that the renovations might surpass what the market can support and eat away at a deal’s profit. Know that you make your profit on the purchase, not the sale and you will be in good shape going forward.”Do your research on what properties are selling for & what they look like from the inside out Click To Tweet
Michael: “I get asked the question from new investors a lot. What do I do first? Find money or find a deal?
I always answer the same way. There is no right answer: do both when you are starting out and as you continue to grow in the business.
I say, if you find a real deal first without raising any money or if you don’t have a lender lined up to help close the deal, then don’t worry. The bottom line is, you can move it or wholesale it to another investor all day long and make a nice assignment fee depending on how well you negotiated the price up front.
Now if you get the money first, this will motivate you to find a deal. You will step up your networking and put the word out that you are ready to buy. Wholesalers will start sending you some possible properties to purchase and real estate agents you are working with will do the same. Also someone else might have a property with no funding -making a perfect opportunity for a partnership.
Take action and it will happen!”What do I do first? Find money or find a deal? The answer is: both. Click To Tweet
Now that you are equipped with the advice of some of the best minds in the fix and flip world, it’s time to go to work.
Did our experts leave out a key piece of advice? Share your own fix and flip secrets in the comments below! What’s the most important piece of advice you would give to a fix and flip investor?