How to Find your First House to Flip
Ryan: Hey, everyone. Ryan, here from House Flipping School. I'm with Mike. One thing that we get a lot of emails about is new investors wondering how to go about finding their first house to flip. Mike, today I want you to pretend like I'm a new investor; I'm looking to get into this. Let's talk about your most recent flip, and particularly how you went about finding this house to flip.
Mike: That's a good question, Ryan, one that I do get asked a lot, especially from some of the students that I work with. The challenges are meeting the right people, creating a good team, and putting offers out there.
Right now I'm hearing from people "that others investors are getting to deals" before they are. This is something I experienced early on when I started out in this business, and it was a little frustrating. For me what I know was happening was that these other investors, these more savvy investors, were sort of beating me to the deals, or finding ways around me.
In this particular deal, I more or less found it through a broker. It was actually his listing, and I had a relationship with him. This was something that just didn't happen after a month or two, or several months. It was actually a relationship that developed over a couple years, and we really felt very comfortable with each other.
I had purchased one property from him a few years back. At that time, I didn't know him very well. I thought the best strategy was to put the offer in directly with the listing broker. The lead was not brought to me by any other broker, so I had the ability to do that.
When you can do that, that usually will give you some advantage, in the sense that the broker's going to be motivated to use your offer, in the sense that he's going to get both sides of the transaction. I'm not suggesting that they're not going to submit the other offers or anything like that. However by getting both sides of the transaction, you might find your offer is the one that is favored.
Fast forward a few years later. This particular broker saw me doing more deals with greater consistency. He mentioned to me that he had a few properties that he had coming up. I got the heads up on the property before it officially hit the MLS. I was able to go in, take a look at it, and really have an offer ready for him as soon as it hit the MLS.
Because of that, I was able to get the deal. He didn't tell me what the other offers were or anything like that, but I was able to sense where I needed to be after having some communication with him. This property did have multiple offers on it.
Basically, what I'm getting to is that relationship-building is a big part of this business. Sometimes, you just don't see instant gratification from that. It's something that you got to put your time in early on. You have to go to the REIA meetings, which are real estate investment associations; I go to three different ones. You create relationships with those brokers and really explain to them what your business is and how you work.
At the same time, if they're working with you and bringing deals to you, you want to be able to fulfill your obligation with them and be able to close on those deals. Some brokers won't be interested in working with you, because you may put multiple offers in, or because they feel like you're wasting their time.
To make it work, you either have to sit down with them and explain to them that this is how your business works, and this is how they will have to work with you. If they're not interested, then you just move on and try to find the next broker who will be interested in working with you, and getting their commission from your deals.
One other strategy you can use is if a broker brings you a particular deal, and it's an area that they really know like their hometown, you can ask them "If I get this property, would you be interested in listing this property for me?" This may sound like a dumb question because you obviously know the answer to that. Why would they say no to?
I want you to think about that for a second. If it's their listing; number one, and you're putting an offer in directly with them, they're going to get both sides of the commission. If you're asking them 'would they be interested in listing that property for you,' after you, in a lot of cases, double the value because of renovation, that's really the bigger payday, because now the property is going to be listed for $200,000 as opposed to $100,000.
In this situation there's a lot of motivation for that real estate broker to work with you. What it all comes down to is strengthening that relationship with the broker, while making sure you promise to do what you say you're going to do. If you tell him you're going to list the property with him, you better make sure you list it with him because that wouldn't be fair if you do not. You certainly don't want to get a bad reputation by not holding your word.
Recently on a property, I asked the broker if she would she be interested in listing this property for me after we've done the renovations. Let me tell you, this deal almost fell apart twice, but she really went above and beyond to save the deal. Really, I think her motivation was not the double commission . . . she was a good broker and I think she wanted to save the deal anyways.
But knowing that she was going to get a $300,000-something listing on the other end, it's certainly motivation for her to really make sure that that deal would be held together. Then when the time came to sell that property, I could have sold that property without ever listing it. I had calls on it before it ever hit MLS. However, I was true to my word, gave her the listing, and we put it under contract the first day we had it.
Backing up to that previous deal that I was telling you about, that one went under contract. We were the highest bidder on that particular one. We'll talk more about the renovations later on. Hopefully, that answered the question on how we got that particular deal.
Ryan: It definitely does. Before we leave, I know we have a lot of people watching right now. This could be their first week in real estate, it could be the first day that they've thought about investing in real estate. What's one thing they can do this week to help them find their first property to flip?
Mike: The one thing I would say that they could do is visit their local REIA meeting. Google REIA, put in your town, and see what pops up. That's where other investors are going. It's where new investors, seasoned investors, wholesalers and real estate agents are going.
If you have the ability, excuse me, you do have the ability because you are watching this. If you don't have any business cards, go out and get some business cards made up, just to be able to pass them out to some different folks that you meet. If you're really looking to get that first deal, what I would suggest is when they give you time to stand up and introduce your business, introduce yourself as an investor looking for your first deal, and tell them that you're very motivated.
Just simply ask if there's any wholesalers in the room or anybody that's looking to sell a property that would fit your investment model. You'd be surprised. By consistently doing that, you will at some point get your first deal coming your way.
Ryan: All right. Good tips from Mike. In the next video, we'll talk about the rehab of his latest house flip.