Fall In Love With House Flipping
fall in love with house flipping
Learn What To Do Before You Buy A Property
Hello Lover! Thanks for visiting Hey Rich Girl. My name is Cynthia Cuccuini and I have been a real estate investor for over 10 years now.
I first got started on this exciting real estate journey when I lost my corporate job. I was a single, 24 year old girl with no money and no job. I was devastated. It was then that coffee quickly became my new best friend. But, I was also tired of being a slave to corporate America and being told what to wear, what to do, what time to come to work, etc.
Here are some useful tips on how to analyze the numbers on a property, inspect it, and find comps (before you buy it)!
There are literally thousands of different ways to invest in real estate. I never really got into wholesaling houses. Although there are a ton of people that are wildly successful at wholesaling (and making a killing in income), it was just never really my thing.
My passion is for rehabbing houses (making them pretty) and providing safe, affordable homes for families to live in. My 3 favorite ways to do this are:
1. Flipping Houses (complete rehab)
2. Rental Properties (AKA being a landlord with light rehab)
3. Lease Options (as both buyer and seller)
Today we are going to focus on flipping houses. This is a very lucrative business. But, with high reward also comes high risk. So it’s best to go into any business armed with as much knowledge as possible to minimize the risk.
Analyze the Deal
When you find a property, you will need to analyze the numbers to determine the amount of repairs that are needed. Use a checklist to go through each individual item in the house to figure out if it will need to be repaired or replaced. So the checklist would include a list of items, such as – Windows, Roof, Furnace, Paint, Hot Water Tank, etc. Also, don’t forget to include the appliances, toilets, and sinks.
Now you will need to determine the cost of the repairs. To do this you can have 3 different contractors come in to give you estimates on the repairs that are needed. Check out Angie's List to see photos of their work and reviews. Get these estimates in writing cause you will need them later. You should also get a home inspection done on the property to minimize your risk.
Why get a home inspection? The qualified inspector can determine the big ticket items (and smaller ones) that need to be repaired and replaced. If your sales agreement calls for a home inspection contingency, then you can take this list of items that need repaired back to the seller and ask for a credit (reduction in the sales price) or ask them to fix the items.
Don’t worry, Gorgeous! Keep in mind that the seller can only say yes, no, or give you a counteroffer.
But, what if the house is a bank owned foreclosure? A lot of times, investors are too scared or not experienced enough to realize that the banks will still negotiate during the home inspection period (as long as there is a home inspection contingency in the contract and you are within the required timeframe).
Often the bank will not agree to do the repairs (unless it is an environmental hazard). But, they do often give a reduction on the sales price based on the home inspection results. Keep in mind that the banks are often not aware of the exact condition of the property and they just want to get it off their books. Banks are in the business to make loans, not sell houses.
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Run the Comps
Now that you know your cost of repairs, you will need to determine the after repair value of the property. This is the price that the property would sell for once it is completely fixed up. To do this, you can pull comps on similar properties that have recently sold in the same neighborhood. You will also want to pull comps for properties that are similar to the current condition of the property that you are buying (before it is rehabbed). This will help determine that you are not paying too much for the property.
Check out the condition of the properties and compare them. Do they have the same number of bedrooms as your property (or will they once your property is finished if you are adding rooms)? How about the number of bathrooms? Square footage? Is there a garage? A fireplace?
These are all factors that you will want to consider. Next, find at least 3 properties that are similar to yours based on the after repair value. Try to find ones that have recently sold within the past 6 months or less. You can also have a real estate agent to do this for you. Remember to use an agent that has experience with real estate investing and flipping properties.
Check out this blog post HERE if you want to find out how we fix and flip properties with no money!
Get the Appraisal
Get an appraisal based on the after repair value. This will give you peace of mind to know what the house will appraise for once it is finished. If you are getting financing from a bank or a hard money lender, then they will require this.
Make sure that the numbers work. Never get too emotionally attached to a property! If you can’t make the numbers work, then walk away. Just like dating, there are plenty of fish out there and another deal will come your way.
Add up your expenses that are needed. This is the total amount for your repairs. Be sure to include holding costs (like utilities and taxes), mortgage payments to the lender (if there is one), title fees, permit fees, staging costs, and closing costs (on both the buy and sell side). Also, include a 10% extra expense because things happen and you will go over your budget.
Once you add this all up, then subtract it from the after-repair value (or the appraised value if you used an appraiser). If you can profit at least $25K on the deal, then it could be a winner!
Welcome to Hey Rich Girl!
Hey girl! I'm Cynthia Cuccuini, a self taught real estate entrepreneur. I've been flipping houses, landlording (Is that even a word)? and designing homes for over 10 years. Come along the journey as I educate entrepreneurs how to invest in real estate.