Learn How to Make Offers

The cheaper you can get the property for, the better.

There are a lot of costs involved with flipping a house outside of the purchase and rehab costs.
There are a lot of costs involved with flipping a house outside of the purchase and rehab costs.

A wise and very wealthy real estate investor once told me, “If your offer doesn’t make you uncomfortable when you make it to the owner of the property, you’re offering too much for the house.”

It’s true. You make your money when you buy the property; you just don’t get it physically until you sell it.

 

Don’t Forget About the Costs

There’s way more expenses involved with rehabbing a house outside of paying for the work and buying the house.

You want to consider ALL potential costs, as they should impact your decision whether or not you’re going to buy a particular home to work on.

Here are a few other costs you might have to pay.

  • Holding Costs: Gas, electric, water, taxes, insurance, security (alarm, armor on doors/windows), loan payments (if the rehab was financed)
  • Closing costs, for when you buy it AND when you sell the property
  • Title company fees

There’s more, that’s all that I can think of right off the top of my head, though.

 

Budget an Extra 10% for Rehab Costs

I don’t care how good you get at estimating repairs, mistakes and surprises happen all the time in this business.

To keep from pulling your hair out, budget an extra 10% into your rehab costs.

So if you and your inspector estimate repairs at $10,000, budget another $1,000 just in case.

 

The Seasoning Issue

When you’re running numbers on a property, make sure you consider the holding costs associated with potential title seasoning issues.

Title seasoning is where a lender requires the owner/seller to own the property for a specific period of time before they’re willing to fund a mortgage on it.

From my experiences, the most common title seasoning requirement is 90 days, but it depends on the end buyer’s lender.

If you're new to the business, try to stick to houses that only need cosmetic work done. (Image: abbybatchelder/Flickr)
If you’re new to the business, try to stick to houses that only need cosmetic work done. (Image: abbybatchelder/Flickr)

 

Start Out with a Property that Just Needs “Lipstick”

If you’re just getting started, stick to houses that just need “lipstick.”

That’s a slang term, if you will,  for houses that just need cosmetic work done, like paint and carpet; maybe some minor things like cabinets or re-tiled floors.

If there’s one thing I did right, this is it. Getting an easy rehab done on your first go at it really helped my confidence.

Plus, it reduced the complexity of my first experience. There’s a lot to the process of buying, rehabbing, and reselling property; having to do a lot of work to your first property only adds to the complexity.

 

Be Patient

I know you might be excited about doing your first deal, but deals are everywhere.

As long as your criteria regarding your ideal property is realistic, don’t rush into buying something that doesn’t meet your criteria.

 

Dealing with Disappointments
Disappointments are a part of this business.

There might be times where you’ve looked at so many properties, that you start to get anxious to the point where you start considering rehabbing ANY property.

Here are a few disappointments that you’re bound to encounter:

  • You’ll think you’ve FINALLY found the ideal property, only to have your inspector tell you that it needs way more work than you expected.
  • Your inspector confirms your beliefs that you have a house that meets your criteria. Then you find out from the title company that there are some liens on the property that kills the deal.
  • You’ll think you’ve found a great deal, only to find out that there’s thousands of dollars in back taxes owed, and the owner lied to you and told you that they were current on taxes.

Bottom-line, don’t get discouraged. Just move on to the next property. Things happen. Don’t get impatient. It’s an almost guaranteed way to lose your shirt in this business.

A real estate agent will make the selling process a lot less stressful for you.
A real estate agent will make the selling process a lot less stressful for you.

 

Consider Listing It

Some “flippers” believe in finding buyers on their own.

Not me.

In my opinion, there’s way too many perks to listing a property with a good listing agent.

Related: Realtors in Detroit Michigan | 12 Secrets to Finding the Right One for You

 

MLS Exposure
For one, having the property on the MLS gives you so much exposure to your property that alone almost makes it worth it; especially if it’s in an area where there’s demand.

 

Showing the Property/Answering Questions
Another good thing about having a listing agent, is that you don’t have to personally stop what you’re doing to go show the property to someone that’s interested.

Even if you have a lock box on the property with the key in it, if the prospective buyer or their agent has questions, they can call the listing agent instead of bugging you.

It’s way worth the cost to just pay to have the property listed.

 

Leverages Another Professional’s Experience
I like the idea of leveraging another professional’s experience when it comes to the selling part of the situation.

I value my time, and I believe in passing-along tasks that can be done well by other people. That way, I can focus on the things that provide me the biggest returns on my time investment that can’t be passed-along to someone else to handle.

 

So there are a few tips for you off the top of my head.  Best of luck to you!

By the way, what’s the biggest obstacle you’ve encountered or anticipated when it comes to flipping houses?  Leave a comment below, let’s talk about it.