Fix And Flip – Critical Steps Of Flipping Homes
Are you planning to flip a home? Are you scared as this is your first time? Are you afraid of making a mistake? Do you want to know what fix and flip loans are? This post will give you answers to all these questions with some good suggestions about flipping homes.
This is a huge discussion and some people spend days and weeks in explaining that but I want to break it into elements:
1. Finding a Property – It is probably the most difficult and time consuming task. The key in finding a property is to “find a good deal”. There’s an old saying, which says that just because it’s a deal doesn’t mean it’s a good deal for you.
Just because something comes available doesn’t mean that you are the best person to purchase that property, even if there is profit. So, you want to be selective for the things that you are purchasing based upon your education, experience or knowledge.
2. Evaluate the Property – Just because you have a property under contract and you are in the process of flipping homes, doesn’t mean you are done. Next thing you should do is to evaluate that property and there are two things you need to look at, while you are evaluating a property:
i. Property Condition – You should send an inspector and your contractor over there to see if there is any major problem with the property and you want to make sure that the property is in the condition that you were thinking.
You should get hard bids to know what repairs are really going to cost you on this property and make sure that you don’t go over budget and to make sure that you don’t run into any type of troubles in future. You want to do real evaluation.
Now, it is important not to fall in love with the property. Just because it may look like a good deal or just because it’s the property that you would really like to own, is not a good idea. You have to be subjective about this.
ii. Price – The second thing, which needs to be evaluated, is the price. Are you really buying this property right? I suggest you will do several things.
One is to look for comparables. You can look for active and sold comparables in the same neighborhood. When you have to take comparables, we mean houses that are sold and houses that are currently on the market.
You want to analyze those and you are looking for the lowest. You are going to start with the lowest homes, not with the highest homes. So many people work on the highest price and work your way down.
You got to start with the lowest and the most inexpensive homes in the market that are in the neighborhood and you work your way up until you find one that is similar to yours. That’s the value of the property.
I can tell you now that finding the value of a property is the most important thing. The mistake that most of the real estate investors make is over valuing the property. So, you got to be careful.
3. Make fix and flip loans Application – Once you are done with the evaluation phase, now it’s time to make a loan application to secure your financing for fix and flip.
You want to work with the hard money lenders, who does fix and flip loans. We can also help you with that type of loan. You can secure your financing and get all that types of stuff to be taking care of. You then close on a loan.
4. Get the property rehabbed – You need to get the work done. Like we have talked about that in evaluation phase, if you have done your job properly and you have already figured out who is going to do the repairs.
I suggest you to put together a time schedule. Every single person is going to do the repairs in a particular time frame and that signed that contract. Don’t leave it up to the contractor to type up the bid.
Type it up yourself. Type up everything that the contractors going to do. You can also put queue numbers in there for the type of toilet you want them to buy.
You should go to home depot and take pictures of different types of things you do want and keep them in files. The easier you can make this for the contractors and handymen to know exactly what you want to be done, the better.
The other thing I like to do is to put a bonus and I like to put a deduction if they don’t get it done on time. So, basically I put a bonus if they get it ahead of the schedule and put a deduction if they get it behind the schedule and so completing the repairs.
You should have repairs done in anywhere between 15-45 days. If there are not many things to repair, then 15 days and at maximum 45 days. This is even if you are doing the work yourself.
The point is that time is money and if you are spending too much time to get this property done, you are going to find yourself in a bad situation.
Next thing you want to do, is you are going to re-evaluate the property again. Once you get the repairs done, it’s time to re-evaluate the property to know what the value of the property is and it may have changed, so be open to that.
I can assure you it hasn’t gone up. It probably just gone down or may be it has gone down. You should re-evaluate the property because when you come up with property, you want what’s called precision pricing. That’s the thing.
You evaluate it again and then, you get this property listed and I recommend you to do this with real estate agent. I really do. They get maximum exposure.
I also recommend you to list the property to what you think it is going to sell for. To me people who are trying to sell the property for $20-30,000 more to what it is going to sell for, thinking that people are going to give them an offer and they will negotiate from there.
The old saying that I can start high and always comes down is complete crap because what happens is that you are always chasing your tail. So, you should start from what it is going to sell for and get an offer fast.
Then that’s basically going to wrap you up. Once you get an offer, you are going to put that offer towards closing, get that property closed and get your payday.
If you can follow these basic steps to fix and flip homes, then nothing can stop you in getting fix and flip loans.
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