Paper Trading Model For Flipping

[Chris Marshall]

I thought I would share something I kind of did when I was first starting out looking at flips. I sort of took the principles from paper trading stocks and applied it to the flipping model. 

So with a flip that I was looking at what I would do was look for a property that needed to be flipped. Once I found one I would analyze the deal. I would try to figure out what my costs and hold time would be. I would then set all that aside and I would wait for someone to purchase the property and actually flip it and once the property was sold, post-flip, I would look at what I thought I could buy it for, what my costs and hold times would be and then I would look to see if my ARV was the same as the sale price and then I would look to see if I made any money. If something didn't come out right then I know that I messed up in my figuring.

A big problem as you might of already seen is that could take months if not years depending on the extent of repairs and the length of time it sat on the market or it may have been something the owners wanted to live in so it never even was listed for sale.

What I would suggest if you want to do this, is I would find someone who is actively flipping houses. When they find a prospective deal you should ask them if you can analyze the property just for learning experiences. Analyze it separate from them so you can compare it to what they got and see how close you were to their numbers. Then follow that property throughout its renovation, assuming the flipper moves forward with it after analyst. After the project is done compare what your estimated hold time was to their actual, as well as their construction costs. Then again figure out how close you were. Then again when it sells figure out how close you were to the ARV that you estimated in the very beginning.

This can be a fairly long process but if your learning from an investor that does high volume you could do maybe 10 properties like this over the course of 6 months or so. This would be one heck of a semesters worth of schooling. Also not much time invested into this and no money. 

I do realize that leaves you with a task of finding a house flipper that is willing to allow you to learn underneath him and that might mean you work for him wile you are learning or possibly paying him or whatever but there is already enough resources out there on finding mentors. I hope someone finds use with this, or possibly finds a way to improve upon the idea!