Let’s talk frankly at the outset—flipping houses is a huge undertaking. It will require hard work and determination. It will also be one of the most (potentially) lucrative business ventures you’ve undertaken.
Success in real estate, as with all success, isn’t guaranteed. But with the right approach and a few insider secrets, you’ll be ready to build the financial security you’ve dreamed of. In this article we share the lessons we’ve learned at InstaLend—one of the country’s fastest growing private lenders—to help you get started.
What Is House Flipping?
“House flipping” is a general term. It’s not any single exit strategy, but rather it’s a means to an end: the investor simply connects the original seller with an end buyer. The “flip” refers to the home changing hands.
Flipping involves either rehabbing or wholesaling. Rehabbers buy homes under their market value. They typically target distressed homeowners who are motivated to sell at a discount, which means higher profit margins and a stronger deal. Once acquired, the home is brought up to market value through renovations. Some “flips” need a lot more work than others, and the after repair value (ARV) will help you determine how much money should be spent. After renovations, the investor will then proceed to sell the home to an end buyer for more than they’ve spent.
Why Flip?
There are few better ways to build the life you want. Flipping takes time, patience, and capital. The rewards are time, capital, and the flexibility to live life as you choose.
For most of us, that’s more than enough reason to get started.
How To Start Your House-Flipping Business in Four Steps
Starting a house flipping business might feel intimidating, but it shouldn’t. Here’s a proven five-step system to make the process as painless as possible.
Step 1: Do Your Homework
Nobody—and I mean nobody—should throw their hat into the house flipping ring without having educated themselves first. You’ve started that journey with this article! You needn’t be an expert by the time you start investing but learning the ins and outs of the industry will set you up for optimal success. Remember: there is no better foundation to a house flipping business than a sound education.
Step 2: Assemble the Right Team
Real estate is a people business. Always has been, always will be. It’s less about properties and more about relationships. Therefore, you can’t expect to make it as a real estate professional without the right supporting cast.
If you intend to be a solo investor, the usual rule applies: treat others in the industry how they deserve to be treated. This will pay dividends in the future. If you are going to hire a team, make sure they are a great fit for your goals and bring something new to the table.
Step 3: Line Up Financing
It’s impossible to start flipping houses without funding. Without capital, there’s no reason to believe you’ll ever be able to land a deal. As a result, you should establish relationships with the right lenders before you even start investing in real estate.
Here’s where the “people business” part becomes crucial—start building relationships with a lender now, even before you’re found your first property. At InstaLend there’s nothing we love more than working with investors at the earliest stages of their real estate dreams to figure out what’s possible. These are the kinds of relationships that can make all the difference as you’re getting started.
Step 4: Identify Your Endgame
You’d be surprised how many investors we meet who don’t have a clear end goal in mind. What do you want to achieve by the time it’s all over? How much of your life are you willing to invest in success? How will you know when you’ve reached it? The answers to these questions will give you great insight on how to proceed.
Learn one segment and learn it well. Become the best in your area. And then build on that success. There’s an old proverb that says “If you chase two rabbits, you won’t catch either one.” Take that lesson to heart as you begin.
The Best Kept Secrets of Successful House Flippers
The greats all make it seem easy—one amazing deal after another. What’s their secret? Having worked on and observed hundreds of these deals, here’s what we at InstaLend have found that all good investors do:
They Prioritize Relationships Over Money: Remember the part about real estate being more about people than about properties? Who you know is unequivocally more valuable than any amount of money, and today’s greatest investors know that.
All the money in the world won’t do you any good if you can’t foster healthy relationships with others in the industry. That’s why the best investors spend time on their relationships… even more time than they do on their deals.
They Offer a Genuine Helping Hand: Nobody wants to work with someone they don’t respect or trust, and homeowners are no exception. Consequently, homeowners are more willing to work with house flippers who genuinely lend a helping hand.
If you take advantage of people, your reputation will precede you (and you’ll become a loathsome person in general). If you get into flipping to help people find mutually beneficial deals… well, that reputation will precede you.
And you’ll also be able to sleep at night.
They Never Stop Networking: Are you picking up on the theme here? Relationships are everything. The best investors never stop expanding their contacts list. They know everyone is a potential source of insight or a hot tip. You never know who will be the catalyst for your next deal.
They Understand the Power of Leverage: Money isn’t the only determining factor when buying a home. Sometimes homeowners are motivated by something else, and the smartest investors will uncover their needs. Leverage those needs when you’re making your pitch. Good investors will figure out what the owner wants and find out a way to give it to them.
Three Mistakes to Avoid When Starting a House-Flipping Business
Sometimes knowing what not to do is just as important as knowing what to do. Here are four mistakes we see over and over again from beginning investors. Make sure you avoid them!
1. Having Insufficient Funds
Insufficient funds are perhaps the most common mistake new investors make. Whether it’s underestimating a project or simply not being able to secure capital in the first place, insufficient funds will derail a deal faster than just about anything else.
Secure sturdy relationships with those who have quick access to capital and keep them up to date on your deals.
2. Having No Time
Give this business your full attention or close to it. Flipping takes a lot of time—especially as you get started—which means those who can’t commit will find success hard to come by.
3. Lack of Education
We started with education and we’ll end with it too. It’s just that important. Learning your industry is invaluable and can unlock nearly limitless potential. But many investors start out with a book or seminar and expect success.
It takes more. Much more. Find an expert who’s willing to work with you on the basics. Learn everything you can. Keep learning and keeping up with rules and regulations. Doing so will help avoid the avoidable mistakes.
Your Next Step
In short, here are your priorities—education, relationships, and capital. You should work on them in that order.
The good news is that lenders offer all three. That’s because we’re passionate about helping you get started on the right track, because we know that a healthy start means the beginning of a long-lasting and fruitful relationship. At InstaLend we’ll even set up a free consultation to answer your questions and give you resources to launch your business, with no strings attached. And because we want to be as accessible as possible, you can even call our Founder at 929-523-8947. If you’re ready to set yourself up for success, give us a call.
0 Comments