Flipping a House: Getting Started
It takes a lot of work to get a project off the ground. If you have been thinking about buying, fixing, and selling a house allow me to give a few pointers on how to get from the idea phase to the cash in your pocket phase. I recently sold a house to a man who is doing his first flip and it made me sit back and think about every detail that needs to be addressed before you start seeing a return on your investment. When I was in college I hated those classes that made you get in teams or talked about team building or strategic management etc. These classes always seemed like a waste of my time (and money) and I found that I rarely bothered to attend them. However when you're looking at getting started flipping a house you need a team and a good one at that. This post is going to tell you what you need in your team and what you need to do to get your first project off the ground.
The first person you need in your team is your investment consultant. This is what I do professionally. Your investment consultant is your first point of contact and is often the most valuable person in your tool box. This person is the one who is going to bring you "the deal". Because of the market that they operate in, they are often very savvy in who else to include in your team and often times are investors themselves. Our company sells roughly twenty deals a month. With that kind of volume you can anticipate that we know most of the contractors in town, most of the agents, and most of the people in the investment real estate game. What this person can provide for you is experience. As a person who sees 200 flips and rental rehabs a year you would be safe to assume that they have a certain expertise in the area of distressed assets. Your best bet is to spend a lot of time with your investment consultant to point you in the right direction for contacts.
In order of how the transaction will progress your next most important person to have on your side is a lender. Distressed assets are not your typical sale that your agent from your favorite real estate company is going to be able to help you with and something that your bank you have the mortgage on your personal residence is going to be able to lend against. This is more important than you might think. A property that is going to make you twenty thousand dollars is not going to sit on the market for three weeks to allow you to inspect and attempt to get financing on. The real people making money in real estate are going to purchase it in cash in a matter of hours! You need to have a hard money lender that is capable of handling such transactions. For those unfamiliar with what and how hard money lending works please see a couple of my previous posts on why this is so critical to have worked out.
Why hard money? Because you like money. Because more money is better than less money. Because you want that new Lexus and you're ready to retire and work for yourself. Fred Flinstone still buys houses in cash. Do you want to be Fred Flinstone? I have an endless list of reasons why using hard money financing is superior to using cash, just check my older posts. If you have good credit get with a credit based lender. New Western Acquisitions owns a bank which is there to make your investing as streamlined as possible. Check out Sherman Bridge Lending if you want to learn about how money works. The last time I spoke to a Sherman rep I was on the phone for two hours and learned more about lending than I did in three semesters of finance at UTSA. Watch a free video on youtube. Get your hard money in order before you lock a deal down to ensure success.
Your next most important member is your contractor. There are two ways of approaching a rehab from an investor standpoint. Your first method and the one that will ultimately be the cheapest is to individually subcontract each job that needs to be done on the house. This method is the most time consuming and labor intensive and is really only recommended for the investor who flips houses professionally and has quite a bit of experience in the area. The second method is hiring a general contractor to get in there and handle the entire project. This can be done for an investor who doesn't even live in the state in which the house is located. I recommend this path for anyone who is doing their first flip. The typical person who sits down in my office is going to be a business professional with a good job whom is looking to make more money by investing in real estate. You probably don't have the time to spend every day out at a house ensuring that the work on your investment property is being done. In addition to saving time your contractor can also give you tips and suggestions about what to do to the house to make it worth the most. I've picked up tons of tips from skilled contractors on houses that I've flipped.
Realtors®. 5% of agents make 95% of sales. Fact. 95% of Realtors® are not going to be the hustler you need to sell your house. This is probably going to blow your mind, so brace yourself. I am a licensed real estate agent that buys and sells distressed houses but I use another real estate agent to sell my houses! Don't get me wrong, I'm awesome at what I do and that is buy and sell distressed assets. I have neither the time, patience, or network to sell retail, recently rehabbed houses. If you're interested in someone who is going to work as hard for you on the retail side as I do on the distressed side give my agent Zachary Taylor a call. This is one agent who seriously knows how to sell houses and flips them himself (so you know he knows what he's talking about).
For anyone who has any questions about how to get set up to start making some serious cash just give me a call at 210-710-1617 or email me at firstname.lastname@example.org. Happy hunting and godspeed.
824 Broadway St. Ste 101
San Antonio, TX 78215