If you’re new the world of house flipping, if you’re curious about it, or if you’ve done it before but don’t think you did it right because your profits didn’t match your projections, then I’ve broken down the basics for you in 5 basic steps.
If you don’t know what you’re doing, the best place to start is by cozying up to someone who does. Not only will a good education, mentor, or coach save you a lot of unnecessary time, cost, and headache, you will learn faster and turn a profit sooner. I recommend attending a Lee Arnold System Funding Tour to start with, and with several fast approaching, this event could be coming to a town near you. Tickets are $497 at the door, unless you claim your paid ticket now.
For more choices of what type of education would best fit your needs, visit http://leearnoldsystem.com/lp/catalog/ or call 800-533-1622
- Finance Your Flip
Most banks won’t finance a distressed property, nor will they fund the renovation costs without collateral (like a second mortgage on your house). I wouldn’t recommend that; READ HERE to learn why.
You could use your own capital, if you have it. Or, if you’re like most people who don’t have that kind of cash lying around, you could get approved for a private money loan. Like us here at Cogo Capital, private money lenders base a loan on the property itself, and not solely on you.
- Buy Smart
You don’t make money when you sell a flipped property, you make money when you buy it. You need to purchase a property right, or you’re already on the wrong foot. So, how do you determine how much to off on a property in order to make money on it? The formula is easy!
Take the ARV (after repair value of the property, i.e. the retail value), multiply it by 70%, and subtract the cost of repairs. Whatever is left is your MAO (maximum allowable offer).
Let’s say you want to put an offer in on a property that has an ARV of $200,000. Take $200,000 x 70% = $140,000. If the renovations will cost $40,000 (get several estimates by licensed and bonded contractors), that’s $140,000 – $40,000, which = $100,000. The maximum amount of money you should offer on this property is $100,000, and if you can get it for less, you’ll make more!
So, $200,000 (ARV) x 70% = $140,000
$140,000 – $40,000 (rehab cost) = $100,00 (MAO)
- Remodel Right
There are so many mistakes you could make in a rehab project. Mistakes are easy to make, but it’s just as easy NOT to make them if you know what you’re doing! Here are 3 comprehensive guides to get you started on managing your project from start to finish:
- Sell Fast
Time is money in real estate investing. If you overprice a house, you run the risk of having it sit on the market too long. You’ll pay in holding costs and tie up your funds on the next potential project.
Part of selling fast is staging the house right, for my simple steps on how to stage your house to sell, CLICK HERE
You’ll also want to hire a professional photographer, create a quality online listing.
Want to become a pro? Get started now by getting off the couch and getting involved! If you need an event to attend, we have a hedge fund that will pay for your $497 for your seat to the next Funding Tour. That’s how important we believe networking and education are. CLICK HERE for details or call us at 800-533-1622 to secure your seat, of show up and pay $497 at the door.
To Your Success;
Lee A. Arnold
The Lee Arnold System of Real Estate Investing
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To see our latest success story, visit https://cogocapital.com/blog/it-was-worth-it/