Real estate is seeing some great inclination from investors, and why shouldn’t it? After all, it is one of the lucrative businesses. However, if you think you don’t have the capital and the experience to set off your career as a house flipper, don’t lose hope because there are thousands of books on flipping houses that you can get help from. While that might be time-consuming, we have gathered 5 rules to set you off in the right direction Flipping Houses For A Living.
1. See if you have the capital
To start any sort of business in any industry, the first thing to do is see whether you have the up-front or even backup juice for it or not. By juice, we, of course, mean money.
Those who have the capital to start their business as house flippers already are a one step ahead in the game. However, that doesn’t exclude the ones with no capital from starting the business.
If you’re in the latter category, there are certain ways in which you can generate enough money. For example, you can take loans from a bank, someone else you know, or start a joint venture.
Joint venture means partnering with someone who has the cash. Once you do it, he’d invest the cash while you’d do the work. The profit could be 50/50, or any percentage decided between you two.
2. Start gathering a team
Since real estate involves too many complications—especially for a novice—you might want to gather a team for starting the business. Think carefully about it. If you have the money or even experience, gather people from the industry that have what you don’t.
That way, you could cover every aspect of business by having people related to it in your team. A typical team must have a CPA, contractor, real estate agent, attorney, insurance agent, mentor, and wholesaler.
3. Look for a low-cost property
This can be fruitful especially for the beginners and your realtor or real estate agent can help you out in it. If you don’t have one, hire him because realtors know every nook and corner of the city and they know which property is worth a certain amount in these times of shortage of inventory.
However, with that, also invest in bandit signs to encourage house sellers to call you directly. Other methods that you can employ involve checking the listing of your town or city for the owners of abandoned properties, or target owners through efficient email marketing campaigns.
4. Find MAO
MAO stands for Maximum Allowable Offer – in simpler terms, the amount which you’ll pay for the property.
Here’s how to find it.
Ask your real estate agent to evaluate the After-Repair Value of the property. That value is the price for which the property would be sold after repairing and the agent finds it out by looking at how the similar properties sold out.
Let’s say the ARV is $400,000. Calculating 70% of it as per “The 70% rule”, we get $280,000. Now, minus the repairing or renovation cost from it (ask your contractor for that). Subtracting the cost (let’s say $80,000), we get the MAO which is $200,000 – the amount payable for the property.
5. Speed up the process
Flipping can be lucrative only when the process is done faster. This is because the more you hold on to a property and your investor’s money, the more costs like taxes, financing payments, utilities, and other costs would mount up; thus, taking a toll on the profit. So, the best approach to avoid this would be doing everything fast.
Only looking at the market dynamics is not going to do any work for you. You’d have to think about the process itself and see where you can improve it. In this matter, the rules state above can help you in every way.