4 Tips to Successful Flipping

4 Tips to Successful Flipping

Real Estate investing is always good and sometimes it’s red hot. When it’s hot thousands of people start calling me to ask about real estate investing education.   I decided to create NV Real Estate Academy because not only is this an amazing time to get in, but it’s time to share the wealth.

The truth is that it’s simple, but not easy. Here’s a quick plan that will enable anyone to begin building financial independence. There are basically four steps to investing in single family homes:

Tip 1:

  • Buy homes below full market value. Yes, people really do sell homes for less than the home’s full value. The key is to understand that most home owners will only consider a purchase offer that is all cash and within 5% to 10% of their asking price.
  • The successful investor learns to find financially distressed home owners who have no choice but to sell for less than market value. They have lost their job or been suddenly transferred; they are divorcing; they been living beyond their income; the family has been overwhelmed with medical bills and, not uncommonly these days, their money has gone to support a drug habit.
  • Those are examples of motivated sellers. They have to sell and they will accept something other than a conventional, all cash offer.

Tip 2:

  • How do you find motivated sellers? You work at it! Like any business it is important to develop a little marketing plan. One that is simple, yet very effective, is the one that was proven 75 years ago by the Fuller Brush company; door to door sales.
  • You are selling your skill as a home buyer to people who must sell. Your are there when they need you and you have the skill to help them solve at least part of their problem. With door to door prospecting you will learn more and buy more homes quicker than any other method. However, most people just won’t walk door to door for three or four hours per week. OK, there are other ways.
  • You can watch public notices for the announcement of foreclosure sales. Meeting with a home owner right after they’ve received a notice that they are about to lose their home allows you to deal with a very motivated seller. Other public notices that provide buying opportunities include probate, divorce and bankruptcy. You can follow the Homes For Sale listings in your local newspaper or Internet site.
  • You can telephone the names found in these notices or, and this is the least time consuming, send a postcard expressing your interest in buying their property. It will produce buying opportunities, just not as many as personal contact.

Tip 3:

  • After you’ve found a motivated seller you must understand how to frame offers that provide benefits for both you and for the home owner. A good real estate investor quickly learns that this is not a business of stealing property, but of solving problems in a way that benefits the seller.
  • The home owner is in a tight spot of some kind and you can save them from public embarrassment and, in most cases, give them at least a little cash to get a new start.
  • No investor can afford to leave cash in every deal. No one but Bill Gates has that much available money. You must use creative techniques like, leases, option and taking over mortgage payments. Little or no cash is needed for those deals. You can find plenty of educational material on those subjects by coming to one of my Free Events.

Tip 4:

  • You make your profit when you buy! Never make a purchase until you’ve carefully determined exactly how you will get to your profit. If you hold it as a long term investment will the monthly rental income more than cover the monthly mortgage payment? Will you sell the deal to another investor for fast cash? Will you do some fix-up and sell the property for full value? Will you quickly trade it for a more desirable property? Have a plan before you buy

 

There you have four steps that even a part-time investor can execute in three to four hours per week. What’s the missing ingredient? Your determination and perseverance. If you will unfailingly follow the plan for a few months you will be well on your way to financial independence.

Ways To Find Money

Ways To Find Money

Some of the most common questions I get from new students is “How do I do this if I don’t have any money” and “Do the creative real estate financing techniques you hear about really work?” Yes and no. They likely have all worked somewhere for someone at least once. The important point is to understand the principles involved, so you can find your own creative ways to invest in real estate. Here are ten methods to get you thinking.

  • Use hard money lenders: Ask around or find these online. These lenders specialize in short-term loans at high interest. Typically, you use this type of financing for a “fix and flip.” You can get the money fast, and if you make $30,000 on a project, who cares if you paid $10,000 interest in six months?
  • No-doc or low-doc loans: With these loans, no (or low) documentation of your income or credit is required. You can find banks that do these online now. You’ll only be able to borrow 70% to 80% of the purchase price or property value. However, if you have 10% in cash, you might be able to borrow the other 10% or 20% from a friend or the seller.
  • Seller financing help: Sometimes a bank will loan you 90%, and allow the seller to take back a second mortgage from you for 5%, leaving you needing only 5% for a downpayment.
  • Land contract of “contract for sale”: Called other names as well, this just means the seller lets you make payments, and delivers the title upon payment in full. I sold a rental this way for $1,000 down, because I wanted the 9% interest, and the higher price I got.
  • Credit card advances: Suppose a seller will take $10,000 down on a fixer-upper that you expect to make $20,000 on. Why not use credit cards? If your card limits allow for repair money too, this is a true 0-down deal for you, and if you turn the project in six months, you will have paid maybe $1,000 or $2,000 in interest on an 18% credit card. Don’t let $1,000 get in the way of making $20,000.
  • Use your retirement accounts: The laws are pretty complex in this area, but you can check with a tax attorney to see how you might borrow from your own retirement account to finance real estate investments.
  • Borrow from friends and family: If you go this route, keep it all business. In any cae, loaning you money at 7% isn’t a gift if their money is getting 2% in the bank.
  • Use real estate note buyers: Suppose the seller needs cash. He raises the price, and sells to you for $100,000 with no money down, taking back two mortgages from you for $90,000 and $10,000. He arranged (or you did) for a note buyer to pay him $80,000 cash for the first mortgage at closing, getting him the cash he wanted. You pay two payments now, one to each note holder, but you got in with no money down.
  • Borrow on another property: If you take out a home equity loan for a vacation, and then forget to use it for that, you can later use the money for the downpayment on an investment property, without violating the rules of the bank that gives you the primary mortgage. In other words, you got in with no cash of your own.
  • Start partnerships: For bigger projects, you could arrange for five investors to each put money into a partnership, with your share being the management responsibility instead of cash.

Remember, these ten creative real estate financing techniques are just to get you started.

Assembling Your Power Team

Assembling Your Power Team

There are several important things you need to be successful in real estate investing, one of which is a great team. I’m going to talk briefly about who should be on the winning team:

  • Your Mentor: every successful entrepreneur needs a good mentor. A guide. By training under the watchful eye of one smarter then us, we can only get smarter. Start at your local investment club.
  • Mortgage Broker: you want someone who has the experience of working with other investors. They need to be creative and smart!
  • Real Estate Attorney: it is really important to have someone on the team who can go through contracts, and who knows the legalities of all your moves.
  • Escrow Officer or Title Rep: having a good one on the team helps to close deals that much quicker. You always want people looking out for YOUR interests.
  • Accountant: Preferably a CPA (Certified Public Accountant). Your numbers guy should also be well aware of the ins and outs of real estate. Come tax time, this is the man to help you through the write-offs!
  • Insurance Agent: It is always better having an insurance rep that is looking out for you when things hit the fan.
  • Contractor: The good contractor seems like the hardest one to find, but can often make or break your profit margin. You want someone who gets things done on time and under budget!
  • Supportive Family & Friends: Having the support and backing of loved ones is important in any endeavor.
  • Realtor: Someone keeping an eye out for you
  • Property Manager: Someone to watch over your investments
  • Great Handyman: Someone to take care of the little things that come up on a daily basis.

Assembling the team will not happen overnight, but once together, they will give you the backing and help you’ll need to make your real estate investing dreams come true.