Tips on How to Buy a Fix and Flip Property

Do you get excited at the idea of fixing a broken-down property, repairing it, and selling it to a family searching for their dream home??

No doubt a fix and flip real estate business has many advantages but it also comes with some risks as well. The best way to mitigate these risks is to become well-versed in the process of fix and flipping. The purpose of this article is to show you how to fix and flip a house step by step in the right way like how to get the right funding for fix and flips, how to go find off-market deals and on-market properties, how to manage the jobs after you've acquired this property, and how to disposition your property and get it sold.?

Read till the end to know all about the basics and tips of a fix and flip deal, and you'll soon be flipping houses!?

When thinking about the strategy of funding your deals you need to know the difference between hard money lenders and private lenders and how you can start getting some funds for your deals.?

A hard money lender is essentially a company that lends out fix and flip loans. They usually have an LTV ratio. If you're just getting started, usually that looks like about 80% of what they're going to loan on. For instance, If the purchase price of the house for easy numbers is? $100,000, they're going to give you $80,000, and then you're going to have to come up with? $20,000 to come up with the difference.?

Where do you come up with this money??

That's where either private investors or your own funds can get into these types of deals.?

A private investor is someone who is looking to get into real estate but does not have the time or experience to use their funds inside a real estate deal, so they're looking for someone like you who either has experience or is looking to get into this business.?

? You can split equity out of the deal. If they give you the money for the deal, you can split the profits with them. Also, it would reduce the risk of having another interest payment.?

? With a hard money lender as well as a private lender, you can get into fix and flips without using your own funds. Which is one of the best things that real estate has an advantage over other investment strategies.?

Where to find private investors?

? Private investors are people that have high income-producing jobs. They typically have a very busy schedule. Despite knowing how to make a lot of money, they do not always know where to put it, so they're probably looking to diversify some of their options.?

? When someone's heavily invested into the stock market, talk with them about leveraging some of that stock market portfolio and diversifying it into real estate, and giving them either that interest or that equity split.?

? Network with them. These are people that honestly are your average day people. ? You aren't looking for some guy who is Jeff Bezos-level rich, or even one who has over? $10 million. This might be someone who is making $100,000, $200,000, or $300,000? a year who is just looking to make for passive income elsewhere.

How to network with the contractors and make? sure that you're hiring the right person for the? job?

? Reach out to their sphere of influence and see who else is working on projects. There are a lot of people in your network, people that you know, that may be able to help you.?

? But to choose the best one for your project see who is serious and who is also using other people because some of your best referrals are going to come from either other investors or people that have used contractors quite often.?

? Further, you can post "Hey, I'm looking for some contractors" on your Instagram or? Facebook, and you'll get a list of people from there.?

? What if you don't have a large network? For instance, if you move to some random city with no connections, then you can post in Facebook groups and get connected with people that way.?

? Start getting some referrals in, and then ask them about their previous jobs. Don’t be afraid to ask hard questions.?

How to go find these off-market deals and on market properties?

Finding the right deal is super important because at the end of the day it depends on the deal because if you go buy a crappy fix and flip, and you have no idea what you're doing, it doesn't matter how good of a contractor you have or how much money you have, you're going to lose money. So, use on-market strategies and off-market strategies to find motivated sellers to get a deal at a wholesale price.?

What does a wholesale price look like?

The cost will differ from state to state, because in some states there is a lot of competition,? whilst in others, there isn't as much growth, so you may have to pay a little less to get the return on your investment.?

Most investors are usually looking for about a 25 to a 30% return. This is kind of standard nationwide, that's kind of what their cash-on-cash return is.?

Make sure that you're underwriting the deals, running the numbers on them, and figuring out? what's a good deal versus a bad deal in the following ways:?

Talk with more agents when you're looking on the on-market side. Connect with more people in the industry that are around real estate. The more people you start talking with, the better off you're going to be to find that right property.?

Use off-market strategies like:?

? Google Ads, Facebook, Instagram, have a website presence?

? Do text message marketing?

? You can direct mail?

? Do some old-school stuff like cold calls or door-knocking?

Tips on management process?

? Do not pay a contractor before they start work. Sometimes contractors disappear once you pay them upfront for the job. Hence, it is recommended that if they need some money to get the materials or whatever they need to do, go ahead and get the materials for them.?

? Pay them in phases. Ensure every detail of the project has been met. Pay only for work that has been completed and only after inspecting the work. This also motivates contractors to finish more jobs for you.?

? Get a contractor to do everything, as he’ll create a whole schedule, so that way if you start hiring out subs in the future, you know what to expect from them, you also know how long it's going to take, and roughly about the money that it's going to cost to get the deal done.?

How to manage the jobs after you've acquired? property?

Make sure that your contractors have the materials because sometimes materials are on backorder or they're just out of stock, so you get to make sure that you have those materials ordered beforehand so they're not just sitting on the job, or they put your job at a complete standstill, which obviously is going to eat at your holding costs. So, make sure that the job is moving forward, and hold your contractors to the timeline.

We all know how sometimes things get out of our control from time to time, and if it happens,? have a conversation, figure out what the best course of action is, and how you can get back on track or what else contractors could be doing to get back on track too, as well.?

How to disposition your property and get it sold?

? Find a great real estate agent that's going to hustle for you to get this property sold. If you're a real estate agent yourself, you can list your own listing and put that on the market and you could potentially save some additional costs too.?

? If you aren't a real estate agent, hire some amazing experts and people around you who will help you sell the house.?

? Sell at a price that makes sense to make a profit. Perhaps, if you have spent a little more on the rehab budget, you might then bump up the price to compensate, so that you hit that 25 to 30% profit margin with your cash-on-cash return.?

? With proactive agents, you will not only be able to get more buyers to see your recently renovated home but you’ll also have the opportunities to buy some of the neighbor's houses for cash.?

? Let your agents know they can get compensated for finding you a deal as well. This will create a win-win situation for both of you. If you do this right, it's going to be a very impactful business that can start having a ton of people inside of it to help you out to reach your goals.

Thank you, for reading this blog post on how to buy a fix and flip if you'd like to learn more about investing in real estate...

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