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The Author's word Hello and thank you for reading this book! I also want to thank some of the most important persons in
my life, those who are always there for me. These are the persons who supported me no matter what, for better and for
worse. For this, I have to thank you Lavina, Heinz, Shoofa and Codrut. Alex, you are also here, for your support and patience.
Thank you!
Introduction Selling a property to make a profit can be a great idea to earn some money, but who has the time to wait until
the house bought with money from a loan appreciates enough, so you can make a profit? No one, especially when there is
another way to approach real estate: house flipping. The concept of buying a poor house, fixing it and then selling it for a
profit has been out there for a long time, but it gain more awareness when the TV shows started to promote this business.
However, after the crash in 2008, the bubble seemed to have busted. The reality is you can still sell real estate for a profit, if
you know how to do it. And this is exactly what this book will teach you. Read on to learn how to evaluate a deal, how to
find the money to finance it and how to start the fixing process. All you need to know to start the business of flipping a
house is right here, at your fingertips, so read on and learn how to become a pro in real estate businesses and change your
career right away. Learn to sell houses for a profit!
Chapter 1 Up close When you hear about flipping houses for a profit you think of instant money and speedy repairs. Is this
the reality of house flipping or are the TV shows cutting out the reality bites? The concept of flipping a house is rather
simple: you buy a property at a small price, fix it and then sell for a profit. It sounds good, but if you expect to make
hundreds of thousands of flipping houses, you need to get a reality check! Flipping is not an easy job and the profits are not
that well rounded. On top of it, like any business, if you mess it up you might get into bankruptcy. Other times even though
you do all the right things, you still manage to sink along the properties due to house market crashes or other unexpected
situations that make the selling for a profit part of the flipping impossible. When you get into this business, you must know
a lot more than the basic concept, if you plan to stick around for some time, investing in the house market. There are many
things to learn, but before you start buying and selling, you have to know five major facts of the trade.
Flipping comes with a risk
Flipping is not gambling, but it does come with a high risk. As opposed
to gambling, flipping risks increase due to your own actions. To make a
successful flip you need to buy at the right price, the right house, and
then make the right repairs before you sell. The mix of the right purchase
price and the right repairs is hard to get. When you look at a property
you need to “see� if it has the potential to gain enough value, as there are
many properties out there that don't have what it takes to become
flipping candidates; is you see, there is nothing you can do to increase
their value.
Bad candidates include houses in neighborhoods with a high crime rate
or remote locations where there are no job opportunities. These houses
usually need a miracle to happen under the shape of a huge
infrastructure investment of a huge factory to become unflappable, so be
realistic and evaluate your odds of being successful.
Whether you buy and flip in Chicago or San Diego, you need to focus on
the house when you make the repairs and remember that any flip beyond
$20-$30,000 is the exception, not the norm as TV shows and “make
quick money� guides depict them. Yes, you will encounter highly
profitable flips, which can round up your budget with astonishing sums,
but it is always better to go safe with smaller amounts. Professional
flippers have around 10 flips in one year, each one around $30,000,
which bring an accumulated profit.
Flipping does not happening overnight
Many beginners dive into the business of flipping a property believing
they will fix it and then sell it in couple of weeks. The reality is these
things take time! The actual repairs might last for a couple of months
and then, when it is all ready you will need to wait one, even two more
months before you find a buyer and one more month to seal the deal.
The average flipping time is about six months, which is far from the TV
image of “overnight� miracle. And this is when things go on well, as
planned. Problem is most houses hide a lot of “dirty secrets�, like bug
infestation or else, which eats up even more time, so be prepared to wait
for selling the house and cashing in the check.
When you want to enter the flipping business you need to have a plan for
every bad or good thing that may come across your way, in order to
succeed and make a profit out of the flip. As I mentioned earlier, there
are multiple types of flippers and flips, and you need to know them when
you go out there, searching for a house. Some properties are great sellers,
while others are just great renters. Read on to know what you can do
with a fixed property to be able to assess the potential of a house when
you first set your eyes on it.
Flipping works on every market, if you know how to do it
Couple of years ago there was a house market boom, which allowed
many skilled entrepreneurs to flip houses for a profit, but after the
market crashed, few of them managed to stay on top of their things. And
even without a crash, you might wake up one day and discover your hot
market going cold due to an unexpected reason. Every item that goes up,
must go down and house prices stick to this rule. Always!
However, there are always properties that hold their value regardless the
market’s ups and downs. These are the real deals that are hard to find,
but they exist everywhere, in any market. If you have what it takes to find
such a deal, you might sell for a profit, even when the market is cold as
ice. This is pretty much like fashion: there are trends coming and going,
but some items are timeless. The same goes for houses, so make your
pick carefully!
We are being taught to think positive in order to attract positive
outcome, but when you want to flip a house you need to consider the
worst case scenario. No one wants to think about bad things, but you
need to, if you want to have a plan when things go wrong. Otherwise, you
will be completely unprepared to deal with problems. And most of the
times, if you want more time to solve a problem, it might get worse. For
example, if you discover the roof is leaking and you are unprepared to
deal with it, you may jeopardize the entire fix, as the water infiltration
leads to floods and mold. Be ready to solve every problem on the way
and learn to cut losses when bad things happen.
Different types of flips
In the world of house flipping there are multiple ways to deal with the
classic three step process. In this book we will focus only on the legal
ways to flip a house; there are also a lot of illegal flippers out there who
work their way on the market before being caught by the long arm of the
law. And they are always caught!
Flipping type 1: Buy, fix, flip
Know what you want to do with the house
A traditional flip has three steps: buy, fix and sell. However, there are
multiple types of flips and you need to know what you want to do with
the property before you actually buy it. After you fix the house you can
rent it or sell it, but you need to remember that each day you keep the
house you lose money on interest, utilities and taxes. To make sure you
don't stick with the house for a long time to come, you need to evaluate
your chances to monetize it after the rehab before you make the initial
purchase offer. Many flippers think they can add a lot of value to a house,
when the reality is there is no value to increase from the first place. This
often results in long time on the market and when a house stays on the
market for a long time, its value decreases. Also, if you are insecure
about what to do with the property and you oscillate between multiple
options, you may find yourself being forced to sell it for a lesser amount.
Consider the worst case
The classic form of a flipping implies buying a house, repairing it and
then selling to a person who is going to live in the house. However, there
are multiple ways to deal with this and the other most common type of
flipping.
The newest type of flip is fixing the house with the buyer at hand. This
means you buy the house, find a buyer for the house and then fix it as per
the buyer's requirements. The model is emerging in Baltimore and you
must know where it has the potential to work and where it doesn't work.
For example, this model of flipping would never work in New York
This model has its own benefits.
Flipping type 2: Buy and resell as is
This one is a little trickier. You need to have an eye for houses that you
might sell as they are slightly below the market price.
This type of flipping goes on like this: you buy the property off a hot
market, and then sell it in poor condition, as it is, below the market
price, still making a profit. This is a delicate business which only works
in transitioning markets with a certain type of houses. The profits in this
case are not that great, but you can make some money out of multiple
transactions of this type.
This model has a second version: buy the property and sell it as it is to a
flipper. You will make a smaller profit than a fixer, but you can make the
money quicker than with the classic model of flipping.
Flipping type 3: Buy, refinance and lease with option to buy
This method of flipping can save you money as it can help you find
someone to pay for the monthly house taxes quicker. The principle is
simple: buy a property, fix it up and then sell for terms. When you finish
the repairs, refinance the property at its new value; if you've done your
calculations right, you won’t need to put in more money. The next step is
renting the house with an option to buy after twelve months or more.
The rent payments will cover the mortgage rates and when you feel the
need to sell the property you will not have to pay a broker's fee. If the
tenant buys the house after one year you can also benefit from lower
capital gains tax rate.
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