The Magic Formula For How to Flip a House For Profit
I have alluded to it on previous posts on how to flip houses with no money...
We've talked about it when discussing the importance of hiring the right contractor to run your rehab project...
We've also talked about how important it is to manage your rehab costs effectively to maximize your house flipping profits...
But today we spill the "magical" beans.
The How to Flip a House for Profit Formula
In a previous post on how to flip houses, we discussed a hypothetical $40,000.00 budget for repairs and talked about how important it is to control those costs if you want to learn how to flip houses for maximum profit.
But when you want to learn how to flip a house for profit, this budget number could be the most important number you get to when learning how to flip a house for profit, second only to the ARV .
When you are trying to determine what your offer should be on a property, not only do you need to know what other houses are selling for in the area, but as important, you need to understand what the cost of repairs will be.
What we use to determine cost of repairs is a property repair sheet. It's broken into about 24 sections, one for each section of the house.
It will include a list what we need to repair including many of the following:
- Exterior paint
- Garage doors
- Garage repairs
- Yard cleanup
- Landscaping needed
- Heating system
- Plumbing - including bathrooms and kitchen
When we are walking through a property that we are thinking of flipping, we have this sheet with us at all times to jot down notes of things that need repairs. These notes will then go to our general contractor to tally up a property repair assessment.
Here's a video which explains it in more detail:[youtube]http://www.youtube.com/watch?v=pIL9V_1tNjI[/youtube]
The House Flipping Magic Formula
When I was just starting to learn how to flip a house for profit, I would call a plumber, an electrician, a carpenter and possibly a floor guy and tell them what I was up to. The key was I would be as open and honest with them as possible.
Instead, I'd tell them:
“I am thinking about buying this property on (name of the street). I’d love to give you the work, but I need some help on determining repair costs. Could you come with me and look at this property tomorrow at (time)?”
Simple, direct and right to the point.
It's been shown that to be successful in business you should be transparent. Props to Pat Flynn for showing me that article.
Whatever you do, don’t do this:
"I've done so many house flips, its hard for me to remember...in fact, I have "The Donald" on favorites on my iPhone right here...want me to call him? Oh, by the way, how much to re-do that bathroom?"
Don't be that guy.....
Instead, be transparent. It's far better to just sound like a guy trying to learn how to flip a house for profit for the first time than try to be someone you are not.
The chances are pretty good (especially now) that any of these subcontractors or contractors are hungry for work. So for the ones who really want the work will come and help you.
Don't Forget The House Flipping Safety Net
Just to be safe, it's best to add another 10-15% on top of what your contractor tells you, just to be safe.
It might go without saying - but the more house flips, the less you'll need subcontractors to walk through with you.
However, if you do need them, there's no problem in continuing to do it. It depends on what your personality is and what you're comfortable with.
I know some veteran house flippers who still do a walk through with contractors to determine rehab costs. It all depends on what your comfort level is.
But whatever you do...remember to use the magic formula to learning how to flip a house for profit...transparency.