Are you planning to start in the fix-and-flip business? Fixing and flipping houses can be a lucrative venture if you do it correctly. However, it’s an industry with many barriers. We’ve been there before and know it can be overwhelming, but here we present how to get started flipping houses for beginners.
One of the first steps is to invest time investigating the neighborhood where you’re looking to buy a deal. Consider getting advice from a real estate agent and listing the property with them when you’re done. You want to find a house in a neighborhood with moderate to high employment numbers, lower crime rates, and general signals that it is a nice place to live. Beware of neighborhoods that have a high rate of houses for sale, this could mean that people are getting out and their houses aren’t selling.
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Once you have the ideal property, it is good to have a contractor evaluate all the costs of renovating the house — or use the FlipperForce Rehab Estimator. Once you have the rehab costs you can use the 70% rule to estimate the purchase price of a property.
The 70% rule states the investor should not pay more than 70% of the after-repair value (ARV). For example, if the ARV is $100,000 and the rehab costs are $10,000, then the investor should not pay more than $60,000 for the property.
Here’s the math: $100,000*0.70 = $70,000 – $10,000 = $60,000
Learn More About the 70% Rule
Now that you know how much the whole rehab will cost, the following step is to finance your project. If this is your first flipping project, it might be difficult to access a loan with a hard money lender since they prefer to lend to more experienced flippers. We recommend you expand your network. Start with the people who are already in your network and grow from there. Next, prepare an attractive and professional sample investment package that could sell trusted work. Be prepared to invest your own money too — it will give investors more confidence to put money into your project.
An extra piece of advice, be very communicative and honest with your investors about all the progress and mistakes that happen in the rehab process.
If you have some talents in construction or carpentry, you can save some money building sweat equity. This refers to the unpaid labor you will put into the project, either in terms of physical labor or mental effort. For the rest of the construction labor, you are not able to do, it’s better that you hire a team to take care of it. You should include realtors, contractors, lawyers, and people who can guide you — and will give you more professional guidance your first project.
It’s possible you won’t make a big profit in your first project; however, you will gain a lot of experience that will make a big difference in your next project. You should make sure your investors make money; as a result, you will have their investments in the following project. Also, once you are proficient in the field, you can start diversifying your capital stack, such as getting a hard money loan from Fund That Flip.
FlipperForce is a software specially created for beginners with all the tools you need to start in the real estate investing business. You can analyze deals, estimate rehab costs, manage schedules and so much more that will help guide you to get your first contract, and see your first flip!
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