Advice on entering the fix & flip industry

[Joseph Kirk]

I am looking to get into doing fix & flips. I currently have 3 rental properties and now want to move on into fix and flip. 

I have 3 associates / relatives that would be doing my renovations, as I would be finding, analyzing, and purchasing the deals. 

I have never done a fix & flip. I’ve only ever done renovations for my rentals or primary home. 

Looking for any and all advice for a beginner here. Do you have a step by step list when looking at the potential house? Do you use bigger pockets tool? Do my 3 associates need to create a LLC to be able to do these renovations or can any individual do them, as long as proper permits are pulled? What's considered a good ROI for fix and flips? Does anyone have a template/spreadsheet of anything? Anything is appreciated.

[Noah Wright]

Quote from @Joseph Kirk:

I am looking to get into doing fix & flips. I currently have 3 rental properties and now want to move on into fix and flip...

Joseph, it's great that you're looking to expand into fix and flips, and having three rental properties already gives you a solid foundation. Here are some key tips and insights for getting started:

1. Step-by-Step Process for Evaluating a Flip:

• Find the Deal: Use platforms like MLS, foreclosure auctions, or network with wholesalers.
• Run the Numbers: The 70% Rule is a good starting point. It suggests that you should aim to pay no more than 70% of the ARV (after-repair value), minus repair costs.
  • Example: If the ARV is $300,000 and repairs cost $50,000, you should pay no more than $160,000 for the property. ($300,000 * 0.70 = $210,000 – $50,000 = $160,000).
• Walk the Property: Check for structural issues, roof condition, foundation, HVAC, and plumbing. Focus on the big-ticket items and estimate costs.
• Financing: Whether it's private money, hard money loans, or a traditional lender, make sure your financing is lined up. Factor in carrying costs (utilities, taxes, insurance).

2. Permits and LLCs for Contractors:

• Your associates/relatives don't necessarily need to create an LLC to perform renovations. As long as they pull the proper permits and are licensed contractors (if required in your state), they can legally work on the property. Forming an LLC might give them liability protection and a more formal business structure, but it's not essential.

3. Return on Investment (ROI):

• A good ROI on a fix-and-flip can vary by market, but a typical target is around 10-15% of the ARV after all costs (purchase price, repairs, carrying costs, and selling expenses). This can fluctuate depending on local market conditions and the scope of the flip.

4. Using Tools Like BiggerPockets:

• BiggerPockets has great "premium" calculators, but if you're comfortable with spreadsheets, you can create your own analysis template. You’ll want it to include:
  • Purchase price
  • Estimated repair costs (line item)
  • ARV (after-repair value)
  • Financing costs (interest, points, etc.)
  • Holding costs (taxes, insurance, utilities)
  • Selling costs (agent commissions, closing costs)
  • Profit margin

5. Spreadsheets/Templates:

• If you don’t want to start from scratch, sites like BiggerPockets and others have pre-built templates you can use to run your numbers and track your expenses. I’d suggest starting there, or if you’re comfortable with Excel or Google Sheets, customizing a simple flip analysis template yourself.
  

Final Thought:

Since this is your first flip, starting with a modest project can help you learn the ropes without risking too much capital. It’s easy to underestimate renovation costs and timelines, so always build in a cushion for unexpected expenses.

Good luck with your first flip, and feel free to reach out if you need more detailed guidance along the way!