Hey, guys. It's Mike, with House Flipping School. Welcome to this week's whiteboard lesson. We were recently talking about a property we picked up in Middleborough, Massachusetts. Now I want to go ahead and breakdown the numbers to show you how we arrived at the purchase price for this particular deal.
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.
So many people want to know how to get a loan to flip a house. It's a question I get all the time.
Although traditional mortgages are not my preferred way to fund my flips as I prefer to flip houses with no money using private money, you can learn how to get a loan to flip a house using traditional banking.
Ryan: Hey, everybody. I'm here with Mike. We're talking about his most recent house flip in Middleborough, Massachusetts. Mike, in this video, I want to talk about the most exciting part, the sale.
Mike: Yes.
Ryan: Walk us through how you sold this recent property in Middleborough.
How do you flip a house successfully? You do it with vast knowledge of the details...
Over the past few months I have received many emails from passionate blog readers, asking how do you flip a house...but not in the typical way.
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.
Ryan: Hey, everybody. We're here talking with Mike about a recent deal that will be closing in about 40 days. Mike, I know you did some renovations on this property. Walk us through the rehab process, in particular, apply it to somebody who's just getting into this as a new investor.
One of the most difficult things for new house flippers to master is how to make an offer on a house. Often times newbie investors will locate a great property with profit-earning potential. However they lose the property to more experienced house flippers, because they did not craft their offer in the most effective and attractive manner.
Structuring your offer for success is becoming increasingly important, because it seems like the best deals are being swept up much quicker today than just a few months ago. The market out there is highly competitive, with many investors bidding on the same properties.
Ryan: I'm back with Mike, and we're talking about the onset property which you picked up for $65,000, $20,000 of which went to the wholesale fee, which is not typical from what we're learning here. Now, Mike, how did you know when you got into this deal for $65,000, that at the end you were going to come out on top and make a profit?
Mike: That's a great question, Ryan, and I really wanted to know that myself. This is actually my first deal with this particular wholesaler who is very experienced; and like I mentioned earlier, I tried to see if he would take $60,000. He was pretty quick to say no which meant he had other investors that were lined up to buy it at that price. I learned right there that we were not going to negotiate much, and I definitely wasn't going to find out how much money he was making on this deal.
A few months ago I wrote a blog post about how to make money flipping houses entitled Do you Need to be Smarter than a 5th Grader to Flip Houses?, and I think it turned at least a couple of heads. Its true folks, you do not need a graduate degree in mathematics to make money flipping houses. All it takes to flip a house successfully is some simple multiplication, subtraction and addition.
However it’s the numbers you use that will make or break your house flip deal. The math itself may be extremely simple. Discovering the correct numbers to use, on the other hand, requires research and help from certain experts.
By far the most important number to absolutely nail down to make money flipping houses is the ARV. The ARV is the after repair value of a house flip. Said another way, the ARV is what you expect to be able to sell the house for after renovation. Every single other projection you make will be based off the ARV. It is critical to get the ARV correct, or every single other projection will be off – and your profit margin could suffer as a result.
If you get the ARV substantially incorrect, you will be fighting an uphill battle for the rest of the house flip. To consistently make money flipping houses, you want to avoid this at all costs, and here’s how.
So many people ask us how to get into real estate investing - for many of them the answer is real estate wholesaling
As we stated here many times before, if you’re interested in how to get into real estate investing and have very little money and a very little experience, real estate wholesaling is a great way to get started.
Real estate wholesaling is a lot like flipping houses, but it differs in the fact that instead of flipping houses, you are flipping contracts instead.
Although my preferred way of investing in real estate is through house flipping – the buy, fix and flip kind, I do have a fairly high tolerance for risk. But if I was just starting out, or maybe even a lot younger than when I first started out, I would’ve probably started investing in real estate through wholesaling.
So when people ask me the best way how to get into real estate investing, I first ask them Continue reading