How do you flip a house successfully? You do it with vast knowledge of the details...
Sure, I do get a lot of emails every week asking how to flip a house with no money, how to use partners to flip houses, how to best use general contractors, how to get started flipping houses, how to wholesale and all the basic beginner questions that most people want to know.
In many cases, people will email me specific numbers, addresses, pros and cons of different house flip deals that they are considering purchasing.
Let me tell you, it is AWESOME when people take the time to send me an email - and even though I run a super busy house flipping business as my main business, I'm always happy and eager to help.
But it also makes me realize that although house flipping is a basic five-step process, itâ€™sÂ far more complex than many people are led to believe.
And if people understood the complexity with real numbers and real dollars, and all the little details that go into each and every house flip deal, many more people realize the incredible benefits and wealth possible with this kind of real estate investing.
The Danger With Simplicity
No doubt, keeping things super simple is extremely helpful when learning how to do something new.
Sure, weâ€™ve all heard of the â€œKeep It Simple Stupidâ€ or â€œKISSâ€ formula â€“ but at a certain point in your quest for knowledge, you learn the majority of the simple concepts - but the real secrets of true mastery in doing anything really well - are in the details themselves.
Many people say that â€œThe Devil is in the detailsâ€â€¦ but when it comes to learning how do you flip a house, the devil sometimes is in NOT being aware of the details.
And if you knew some of the details or at least the vast majority of them - you could stay out of some serious trouble, while at the same time locking in some serious profits.
Flipping House Details
It seems like many of these emailers want to know more than just the simple ways in which one goes about flipping houses. Sure, there is plenty of information online on how to get into house flippingâ€¦but many fall short in revealing the exact dollars and details associated with each and every flip.
In many cases, many of those house flippers are reluctant to give the exact dollar figures of each and every deal for fear of tax implications and people stealing their ideas.
However, when I was first learning how to flip houses, this is exactly the kind of information that I wanted to know!
So now that Iâ€™m getting dozens of emails a week from readers of this blog and many of the other places where we teach people how to flip houses, it only makes sense to start giving more details...
Not that those concepts arenâ€™t important, because they are extremely important. But I get a sense from the readers of this blog, that people just want more â€“ more numbers, more mistakes, more data, and more details on everything.
Its not like I've been withholding details on my flips...far from it. Just read a dozen or so posts on this blog and you'll see that there's TONS of info you can absorb to start your house flip career.
But I agree. We SHOULD offer more.
And we will. Very soon...
How Do You Flip a House: The Down and Dirty Details
For the remainder of this spring, and throughout this summer, I will be focusing on developing much more detailed and in-depth house flipping content here at House Flipping School. As mentioned in a past blog post, my team and I are developing a brand NEW houseflippingschool.com blog but also a separate side of House Flipping School never seen before, which will be ready to launch in just a couple of weeks.
And that side will give everyone the most intimate and personal details of each and every house flip weâ€™ve ever done.
And not just the really good ones â€“ but the not so good ones too!
This way you know what TO do and what NOT TO do...
Itâ€™s all going to be there â€“ so you can learn (and we can all learn together) and make tons of money in the process.
Although weâ€™ve yet to decide how we are going to present this and also how much it may cost, I assure you the new House Flipping School will not only continue to give you relevant and helpful free content, but the optional paid side will be extremely affordable.
House Flipping School members will be able to follow along in every deal we do (and many of the ones I donâ€™t do) - as we both make progress and learn together.
Each week I'll keep members up to date on how I am finding properties, renovating responsibly and selling for a profit.
It's going to be a fun ride and I hope you will come aboard as a member.
More to come on that soonâ€¦
How Do You Flip a House: The House Flipping School Whiteboard Sneak Peek!
One of the new components that will be available to House Flipping School members are the Whiteboard Lessons. During these lessons I will break down a recent deal or effective strategy, and talk you through the steps. I think this will be a very effective way of communicating ideas and tactics that are often hard to get across in one blog post.
The below video is one such House Flipping School Whiteboard Lesson. In this lesson I talk about "The Art of the Deal" and how creativity plays a major role in house flipping success.
More specifically, this video covers how I creatively partnered with a general contractor to get into a deal that I otherwise would not have been able to get into. The result of this partnership was a $25,000 profit for me and $25,000 for my general contractor.
I hope you enjoy this HFS Whiteboard Lesson and find it helpful. There is also a full transcript of the video located below.
As always - let me know what you think by leaving a comment at the bottom of this post. Enjoy!
Hey, guys. It's Mike, with House Flipping School. Welcome to the House Flipping School Whiteboard. If you notice, I have a smile on my face. I want to share with you the little smiley guy up there as well. My film crew, Ralph behind the scenes and Ryan, have not even heard of this deal yet, so they told me to share some of this information with you guys.
This is one deal I have not shared with too many people, so I hope you enjoy it. What I'm calling this one is â€˜the Art of the Dealâ€™, because quite honestly, I didn't even set out to put this deal together like this. It all kind of unfolded like this, and I had that kind of 'aha' moment myself on this one.
This is a deal I put together with a contractor partner of mine. The arrangement I made with this contractor was that we were going to be 50/50 partners on the deal, and we would split the profits at the end of the project. It was a contractor that did have some money, so he was able to fund his portion of the labor and lay out money for materials and supplies. Then when we sold the property, we would cash out. We would deduct all the expenses and basically split the profit 50/50.
If you really want to learn how do you flip a house, youâ€™ll see in this example. I want to share with you how I put the financing together on this deal. I do a lot of private borrowing from private lenders that fund a lot of deals, but we also do business with the banks. That's right banks are lending. If you have decent credit and you have money coming in, then go talk to your local bank. I always recommend local banks because you're going to get the lowest interest rate possible. If you can't get financing from the bank, then you can deal with private lenders or work something out with a partner.
Yet that is a video for another time. Right now, I want to tell you how I funded this deal and how I was able to realize a profit on this deal before we ever sold the house. That's pretty cool, so pay attention! LOL
The purchase price of this house was $81,000. After talking with my banker, they decided that they could lend us the money on this project. You've got to realize that banks are not doing 100% financing anymore, and in my position, I didn't need 100% financing.
We put some cash into this deal which I typically do not do. I like to leverage my money and continue to grow my business so I can do more and more deals. In this particular case, because the bank doesn't do 100% financing, I had to come up with $24,500 of the purchase price of $81,000; thus leaving the bank to lend me $56,500 of the purchase price.
What the banks will do is 100% financing on the construction. On the construction side, we had estimated with the bank around $50,500 for the construction side of this project. The bank note totals $107,000, which is the $56,500 for the purchase and $50,500 for the construction loan which gave me a total of $107,000.
Of course it would be really nice if they gave me all that money at the closing, but they won't and that is okay. You probably do not want it all at once anyway, especially if you're not good with managing money. My team is good at managing money but that doesn't matter in the eyes of the banks. The bank's going to release the money as you do the project. This project took us only 30 days to complete, so we were able to receive our disbursements pretty quickly - because we move through our projects quickly. When you want to know how do you flip a house, you gotta remember to work fast.
Let me explain how we were able to realize our profit before the sale of the property. The construction loan of $50,500 is money I'm receiving from the bank to do the construction. What did I say earlier? The arrangement I made with my contractor was I would secure and get the deal, put everything together, do all the paperwork, all the legal work with my attorneys and so forth. He would basically run the project and supply materials at his cost, and pay for everything along the way.
Not every contractor can do that. Some can, but you don't know until you ask. This particular contractor's business might have been slow at the time, plus he was a friend of mine. It was a deal we could do together, so we did.
As this project is completed, I have my bank come by and do their inspections. After which they release the funds to me. After 30 days the project is done and I had $50,500. I didn't go buy big screen TVs with it, buy a nice Corvette or take a big vacation. The money was sat in my checking account safe and secure, and I had access to my profit before we sold the house. How cool is that?
Let me explain one more thing to you:
We had the purchase price of $81,000, we had a bank loan of $107,000, and we had the construction loan of $50,500. $24,500, if you remember what I told you earlier, was my cash, my deposit that I put into the deal. In the beginning, I did have to fund some cash into this deal, but that was not a problem because we quickly got a lot of work done right off the bat.
With our first disbursement we drew around $20,000 or $30,000. We only needed two disbursements on this project. It took two weeks to receive half of it and another two weeks to receive the rest of it.
Immediately, I'm able to fund the $24,500 back within 2 weeks. Technically, I did have some skin in the game, but for a very short amount of time. What does that leave after I fund my initial $24,500? That leaves $26,000. That's not the profit I made on the project, but that's still $26,000 from the deal that I realized before we ever sold it. If you want to learn how do you flip a house, you have to think creatively and non-traditionally like we did in this deal.
Of course there's marketing time and closing time. The nice thing about this project is that we sold it the first week that we had it, but it's still another 45 days before we closed and received the money. In essence, I received the funds a couple months before we ever closed. My GC and I both made about $22,000 each on the project, so therefore I got my profit and a little bit of extra money before we ever sold it.
I wanted to share this experience with you because this is just another creative way of how you can put together deals with a partner. Basically if you think about it, this was like a three-way partnership. My bank was a partner in lending us the money and my contractor was a partner in running the rehab project. I would love to tell you that I've done a lot of deals like this, but the truth is that I have not.
It's just a matter of whether I'm borrowing money from the bank or whether I'm using private funds. I want to share this with you because it's just another way that you can put a deal together to make money.
I hope you enjoyed this House Flipping School Whiteboard. Maybe you can let me know when you put a deal together like that yourself. Sound like a deal?
Again, it's Mike from House Flipping School. We'll see you soon.