Flipping houses is an incredible way to make huge profits in a relatively short amount of time. I’m sure you have seen the shows, “Flip This House”, “Flip That House” or even “Property Ladder”.
These shows all chronicle house flippers buying distressed houses, fixing them up and then reselling them and making insane profits. These shows tend to only show the most dramatic parts of the house flipping business and I can understand it. After all, it is television. Maybe some of the other details, like how to find these deals, how to determine what constitutes a deal and what are the costs they are not telling us about, are not very exciting, but these are the things you really must know before jumping into the real estate investing game.
In this article, I am going to fill in the gaps and show you the things you should know if you really want to learn how to flip houses.
How To Find Cheap Houses That Are Perfect For Flipping
There are a myriad of ways to find houses that would make for a perfect flip. The important thing to understand is that you need to buy a house at a very deep discount. Think about who would need to sell their house and would be willing to sell at such a discount. The motivation of the seller is what we are really interested in. The sellers that are motivated to sell are the ones that are facing foreclosure, behind on property tax payments, going through divorce, inherited a property, people that have a house that needs too many repairs, someone that is buying another house and cannot afford two houses, a landlord that is sick of tenants, and the list goes on and on.
Many of the reasons for motivation can be found at your local county courthouse. Become familiar with the courthouse and where to find this information. Many counties now have their data online. Search the public records and find people with a motivation to sell their property. Send them a letter telling them that you are a local investor and you are interested in buying their property As-Is.
You can also drive neighborhoods and look for vacant houses. These are usually easy to spot as the yard is usually overgrown, there may be a broken window, there might be a lot of trash on the front porch, there might be old mail that has piled up, etc. Write down the addresses to these houses and then get online and search your county’s tax assessor website to see where the tax bill is being sent. Send them a letter stating that you would like to buy their vacant house.
What Constitutes a Great House Flip Deal
Once you have found a motivated seller that wants to sell their property, you need to determine whether it is a good deal for a flip. You will need to know what the house will sell for. Get in touch with a local real estate agent and inform them that you will be buying and selling houses and would like to build a relationship with them. Ask if they would mind running comparables for the property. They will be able to tell you what they think it should sell for fixed up.
Most real estate investors want to buy houses at 70% of resale value, minus repair costs. So you take 70% of the figure you were quoted by the Realtor and subtract the costs to get the house in sellable condition. This will be your maximum allowable offer. Do not offer more than this. You can determine the repair costs by taking several contractors by the house and having them give you bids. Most contractors will do this for free.
The 70% of resale value covers the costs you will probably incur while holding and selling the house. These are usually things like interest payments on any loans, utilities, insurance payments, Realtor’s commissions when selling, closing costs assistance when selling, property taxes and your profit. That last one is pretty important.
I hope you’ve learned something with this quick overview on how to flip houses and are well on your way to getting started flipping houses.
Danny Johnson is a real estate investor in San Antonio, TX that operates a blog about flipping houses, Flipping Junkie. He is currently allowing people interested in learning how to flip houses to follow along as he shows how he and his wife are marketing for motivated sellers, analyzing the leads that come in, talking to the motivated sellers, closing the deals, rehabbing the houses with before and after pictures, and selling the houses for profit. Check out the blog to follow along.
