Flipping Houses For Dummies. Ralph R. Roberts

Flipping Houses For Dummies

a particular property within the past 24 months alleviates all doubts about the chain of title.

Keep in mind that most buyers (except cash buyers) require financing and that certain types of financing, such as FHA loans, come with rules that can eat into your profits. When I put my real estate on the market, I target cash and conventional loan offers first. If I’m not getting offers, I consider buyers with government financing. When a buyer is receiving an FHA loan, the government essentially sets the rules of engagement. For example, you’re prohibited from selling to an FHA buyer until you’ve owned the property for at least 90 days. Also, FHA may require a second appraisal that could lower the price the buyers agreed to pay.

For more information on FHA mortgage related questions, visit http://portal.hud.gov/hudportal/HUD.

Plan B: Surviving a Flip That Flops

Throughout this book, I provide tips, tricks, and warnings to enable you to maximize your profit and minimize your risks, but that doesn’t guarantee a successful flip every time. Flips sometimes flop, even for experienced investors. The following tips can help you avoid some of the more serious situations and recover your composure when something goes wrong:

If your flip flops because of a dip in the housing market, skip to Chapter 20 to explore other ways to profit from your investment.

As soon as you see that a property is a money pit, cut your losses. Don’t throw good money after bad. You may need to sell the house now at a small loss instead of later at a bigger loss. On the other hand, you can go to plan C and rent out the property for 12 to 36 months until the market perks back up and you can comfortably sell the home at or above cost.

Keep in touch with your team, especially your financial backers and agent. Communication is paramount, especially when times are bad. Good team members can help you out of a jam and help you recover.

Don’t give up just because a single flip doesn’t turn out as well as you had expected. Failure is an excellent educator, and if you can work through it, it can be a true confidence builder. Flip three or four houses before throwing in the towel. Your plan, however, must include an exit strategy for all contingencies; otherwise, your flop will take you by total surprise and you won’t know what to do.

Chapter 3

Building Your Dream Team

IN THIS CHAPTER

Picking a real estate agent who can help you find flippable properties

Acquiring sound financial advice

Covering your back with a title company and an appraiser, attorney, and inspector

Hiring contractors and subcontractors to handle the heavy lifting

No one can whistle a symphony. It takes a whole orchestra to play it.

—H.E. LUCCOCK

Most people who talk themselves out of investing in real estate are defeated by a false assumption — that they have to do it alone. The truth is that you don’t have to do it alone. In fact, attempting to fly solo is one of the most common and serious blunders you can make when you’re getting started. Investors who excel at flipping houses are team builders, capable of selecting talented players, coordinating their efforts, and harnessing their skills.

By surrounding yourself with a team of experienced and talented people, all you really need to succeed is a smartphone, some people skills, and a long list of qualified individuals with diverse talents. You don’t know what a house is truly worth? Consult a qualified real estate agent. You’re not good with money? Hire an accountant. Can’t hammer a nail? Call a carpenter.

Sure, hiring these additional people costs extra, but as long as you can accurately estimate the total costs, calculate them into your budget, and still profit from the flip, you win. (See Chapter 11 for details on calculating costs.)

I don’t have all the essential qualities to successfully flip houses. What I do have is the ability to admit that I lack certain qualities and a knack for finding people who complement my skills. In this chapter, I show you how to build your own house flipping dream team.

A dream team is more than just a skilled workforce — it’s a combination of people who have your best interests at heart. They want you to succeed. Money alone can’t buy a dream team. You must nurture these relationships by rewarding the people who reward you through their expertise and hard work. Fair, timely payment, sincere compliments and thanks, positive referrals, and free food go a long way.

Teaming Up with a Quality Real Estate Agent

Real estate agents (or house hunters) who know the ropes and have the right contacts can assist you in managing the two transactions that are critical to your success — purchasing a house at less than market value and selling the rehabbed house quickly at a profit. In the following sections, I explain the beneficial services that agents can provide and give you guidance on finding the best agents for your flipping needs.

Although you may be able to handle one or both transactions (selling and buying) on your own in an attempt to trim costs and boost your bottom line, I strongly discourage it — especially when you’re flipping your first property. You’re about to invest tens or perhaps hundreds of thousands of dollars. A qualified agent can help you navigate the process and avoid common pitfalls that can turn a plump profit into a big, fat loss.

Recognizing the value of an agent

A good real estate agent is more than just a clerk who pushes paperwork through the system and juggles numbers. The right agent is more like the concierge at an upscale hotel — dedicated to serving your (real estate) needs, whatever they may be. Sure, a qualified real estate agent costs money — typically, a 6 to 8 percent commission — but when you consider the amount of money you’re investing, a single mistake can cost you tens of thousands more. A real estate agent who has plenty of experience working with investors can assist you with these tasks:

Helping you track down investors and other sources of cash. (See Chapter 4 for more about financing your flips.)

Finding houses that meet your search criteria, even when those houses aren’t actively advertised as being on the market. (See Part 2 of this book for more about finding properties to flip.)

Assisting in evaluating properties that you may want to purchase to avoid overpaying for a property. (See Chapters 9 and Скачать книгу