LOS ANGELES – Ok. So you have figured out that you really want to start flipping houses. That was easy to decide. The hard part is usually figuring out where to start. There are so many different ways to flip houses that it can get confusing and overwhelming. Just off the top of my head, you could:
- Fix and flip retail (rehabbing)
- Do lease options
- Fix and sell with owner financing
- Fix, rent and sell
- Work short sales
Don’t Be a Jerk Do All House Flipping Trades and Master of Nothing
Choosing one or just a couple of these strategies and focusing on them is what I recommend. You should become an expert in those chosen techniques and the only way I know to become an expert is to actually be doing. You must actually take action and make mistakes. Don’t be fooled. It’s nearly impossible to learn everything before taking action and avoiding making any mistakes.
So many people get caught up in trying to learn everything about everything that they never actually do anything. This includes buying all the courses out there because it makes them feel like they are getting even more prepared. If that is all you are doing, you are probably more likely just getting more and more confused because you are having difficulty remember and figuring what to use and when.
Getting out of our comfort zone and actually taking action is scary for everyone and the only way to conquer that fear is to face it. Studying will not remove that fear. Doing can and will. It’s easier when you just start taking small steps and venturing out. This will allow you to quickly realize what is important for you to know at that particular stage of your learning. I guarantee when you learn this way, you will retain much more and conquer your fears as you go.
We can all do ourselves a favor and just choose to focus on what we enjoy and what feel right to us. This all depends on our individual circumstances.
Let’s look at some common situations and determine which method is best for each (at least in my opinion).
Determining Which Method of House Flipping is Right For Your Situation
Based on your current situation, here are some ideas for which method of flipping houses is likely to work best for you. This is not to say that you couldn’t work some of the other angles successfully, it’s just that you are likely to be starting with more risk and difficulty.
Very Little Money to Start and/or Need Money Fast
First, if you are in a situation where you need some cash very quickly and desperately, you might want to focus on taking care of that with a traditional job or some other way first. You don’t want to be so much under pressure that you make some very expensive mistakes because you HAD to do a deal. I guarantee your emotions will get in the way of what should be purely logical decisions. And decisions about real estate can be very, very costly.
If you are starting with very little money, you may feel that you don’t really have any options. After all, it takes a lot of money to buy a house, doesn’t it?
The thing is, you don’t actually have to buy any houses to ‘flip’ them. You could start out birddogging and wholesaling. Both of which cost very little to no money.
Birddogging is where you find serious cash buyer investors that you sell leads too. Some will pay you a small amount for each lead (there needs to be some motivation for the seller to sell their house and investors don’t usually pay for leads that involve properties listed by Realtors) and some will pay a referral fee if and when they close on the deal. With birddogging, you don’t have to ever even see the house or negotiate anything except your payment from the investor you are dealing with.
Wholesaling is where you take it a step further and work the lead yourself. You actually make offers to buy the houses and buy them cheap enough that you can assign your contract to another investor. This investor buyer will be the one responsible for actually closing on the house. You don’t even have to go to the closing. The title company can mail you a check for your assignment fee or even wire it into your bank account. Obviously, there is more risk with wholesaling because you are having to negotiate to buy houses and then find a buyer to actually close on them. There are ways to limit this risk, but that is not the focus of this article.
I highly recommend people just starting to focus on wholesaling. It’s a great way to learn the ropes and make some good money quickly. You don’t need to know the ins and outs of rehabbing, which can be very risky if you don’t know what you are doing. Wholesaling is also a great way to meet the serious investors in your area. Any of which could become a mentor for you that can help you learn rehabbing.
Some people don’t like to recommend wholesaling for getting started because they feel that finding the deals is the hard part. Not getting enough leads is one of the main reasons people fail in this business.
For marketing to find these deals, I recommend reading how to beat the competition and get better deals.
Money Saved Up, But Not Enough to Buy a House
Maybe you have some cash saved up and would like to use it to get started. Let’s also assume that it’s not enough to buy a fixer upper in your area. What can you do?
You could birddog and wholesale as was just mentioned. You could use your money for marketing to motivated sellers. This will allow you to generate a lot of leads and is the lifeblood of whatever method of house flipping you decide to do.
You could get into rehabbing (buying, fixing and selling) by borrowing from private or hard moneylenders. These are lenders that are willing to lend on investment properties for a high rate of return on their investment. Just be sure to shop around and find the ones with the best rates. Always remember that everything is negotiable as well.
If you want to ease into rehabbing, you can try prehabbing first. Prehabbing is where you buy a house and only do demo and clean up work to the property to get a better price from an investor buyer. Some people will repair the things that scare away the majority of buyers (even if they are investors). These are things like repairing fire-damaged areas, leveling foundations, and rewiring or re-plumbing the house. In my opinion though, if you are going to be doing all that, you might as well just rehab the whole house.
Just doing demo and clean up of the inside and outside is all that I recommend if you are going to prehab. Don’t get carried away and don’t spend a whole lot. The majority of your time should be spent on finding the buyer for the house as holding costs and deeply cut into or destroy any chance of making a profit.
Enough Cash to Buy One or Several Houses for Investment
With enough cash to buy several properties, you have more possibilities. This isn’t such a good thing for a lot of people though. The temptation is to jump right in and buy up properties. The focus might be on getting the houses rather than whether they are the best deals.
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