How do I get started flipping houses?

[Dillon O'Connell]

Hi BP community, I looking to break into the Fix n Flip REI strategy and I have a few questions.

 1)  What is the first thing I should do? Is it finding local properties in disrepair, finding hard money lenders, or getting to know reputable contractors?

2) What are the metrics that Fix n Flippers use to evaluate/compare deals? Why?

3) Are investors that currently employ this strategy finding success in their deals?

Thank you very much, and I wish everyone a happy new year! 

[Doug Lovett]

Well, there’s a lot. I started flipping but if I were to do it over, I’d start with wholesaling and then add flipping after I got wholesaling down. 

I started in 2016 in Jacksonville and am in the process of expanding to Brevard county. Here’s what I did/would do if starting over with flipping:

You need these basic skills, Finding money, Finding a house, Calculating an ARV, Negotiating with the seller if you are sourcing your own deals, Estimating rehab costs, Managing the closing process, Building a scope of work, Finding and hiring contractors, Inspecting work and paying contractors, Selling the house (Staging, listing, negotiating with buyers, closing process).

1. The first thing I would do is start going to local meetings to meet people. There is a large REIA in Orlando - CFRI www.CFRI.net. I think their main monthly meeting is next week - go to that. Join the group and go to as many meetings as you can.   They are one of the largest REIAs in the country but I’m sure there are others also - find those (look on meetup.com and just search google). 

See if they offer any classes on flipping. I was very fortunate that my local REIA had a weekend flipping boot camp a month after I started.

2. Read some books. When I started I read 

The Book On Flipping Houses by J Scott

The Book On Rehab Costs by J Scott (the values used in this book are way outdated unless they have issued a new edition but will help you by knowing what questions to ask)

Flip by Rick Viallani

The Millionaire Real Estate Investor by Gary Keller

I started in 2016 - I’m sure there have been some more books published since then but these will get you started. 

3. Do you have money?  If you have money for down payments and construction, funding will be fairly easy with a hard money lender (also need a credit score of 620-660 min). If you don’t have money you’ll need to start looking for someone to partner with/borrow from for the down payment. 

4. Do you have construction experience?  You will need to understand the basics of construction - you don’t have to know how to do everything, but need to understand the general process of construction. The books above have some of this info. If you don’t have any experience, I would find some books/videos etc to learn. I knew the basics when I started so I don’t have any resources in this area. 

5. Search for wholesalers. You need to get on as many wholesalers lists as you can.

6. Search for contractors. join as many Facebook groups for REIs in Orlando as you can find. There should be at least one that is active. Make note of anytime someone asks for a contractor reference who is recommended and start a spreadsheet/database of contractors. 

Anytime you are driving and see work being done on a house, stop and go inside. Get the contractors info. 

Keep your eyes open for trucks/vans with contractors info on them. 

Visit Home Depit between 6-8 am and hang out at the Pro desk/cash registers and approach guys checking out. 

Ask the Pro desk for referrals. 

There are 3 qualities to contractors: price, speed, quality. You can have any two you want. 

7. Figure out areas and price points where you want to flip.  How well do you know the area? 

Where are flips happening now? Search for ZIP code map and get all the ZIP codes in the area.  Go to list source.com and enter each ZIP code and search for corporate buyers - you don’t need to buy the list, just build a spreadsheet that shows how many corporate owned properties are in each zip code - that will tell you where the active areas are. Spend a couple of weekends and drive at least the major roads of areas you are not familiar with. 

I would start with entry level/1st move up houses. That means an ARV not too much above the average sales price for the area (you can find that on Zillow).

8. Setup alerts on Zillow and Redfin for keywords that may indicate a fixer upper (handyman, handy man, fixer, investor, invester, TLC, flashlight). 

Also estimate the price/sq ft for ARVs in each zip code. Let’s say for example it is $100/sq ft so you want to buy for a max of say $80/sq ft. You can’t directly set an alert for this value in Zillow but you can set an alert for 750-1000 sq ft homes with a max price of $80k. Set a search for each sq ft category Zillow offers.  It’s been a long time since I’ve done this so I don’t recall if you can specify certain areas or not, if you can, do the areas you’re interested in. 

9. Other contacts you will need to find:

Investor friendly title company

Insurance provider

Investor friendly agent

CPA towards the end of your first year

Stager

Bookkeeper

10. Are you going to source deals yourself? Finding deals on the MLS/Zillow/Redfin isn't impossible but also isn't easy. Some flippers rely on wholesalers - others search themselves.

Many investors get started with driving for dollars. If you’re going to do this, get a physical, paper map of the Orlando metro area and a box of crayons. Color in areas you are interested in with green and not interested with red. Use the research you did in step 7 but get more specific. Most zip codes have pockets that are good and those that are bad for D4$. Creating this map will save you a lot of time when you are out driving by skipping areas you know don’t meet your criteria. Use the deal machine app. 

There are a lot of other ways to find properties. If you’re going to make the most money you need to source your own deals. 

11. Start analyzing deals. Run the numbers on as many properties as you can for a while (at least 100 or so) until you get comfortable doing the analysis. Running the numbers includes calculating the ARV, and estimating the following: rehab costs, closing costs (I use 10% of ARV, that will cover a buyers and sellers commission at 3% each and 2% closing costs on each of the buy and sale), funding costs, staging costs, insurance cost, property taxes while you own it, utilities while you own it

Other tips:

Stage every house you flip unless we get back to a stupid market like we had two years ago where you got 20 offers on the first weekend at $50k over ask with no inspection contingencies. In that market staging is not necessary but in a regular market, your property will sell quicker and for more money if it is staged. 

Keep on top of your finances. Proper bookkeeping is essential and a specialized skill for flippers. I own a bookkeeping company for REIs if you’d like to chat. 

Keep in mind that a rehab NEVER goes as planned. There is a surprise in every house, sometimes it doesn’t cost much sometimes it costs a lot - always put an oops number in your rehab budget of 5-10% of the construction cost. They also are almost never done on schedule.