How to Flip Houses | Flipping Houses 101 | How to Get into Real Estate Flipping Houses | How to Wholesale Houses | Wholesaling 101 | How to Become a Wholesaler | Rehabbing Properties | How to Rehab Houses | How to Make Money Rehabbing Houses | Make Money with Wholesaling

Real estate is one of the greatest ways to build wealth in this country. In fact, some of the world’s top millionaires can credit their wealth to real estate gains.

And one way people get into the business is by flipping houses using none of their own money.

There are a few ways to do it, but first, I’ll give you a basic overview of how the whole house flipping thing works so you can see for yourself if it’s something you might want to get into.

Fix and Flip

Fix and flip is the most common type of way to flip houses. It’s what all of the HGTV shows are about. Fixing and flipping is exactly what it sounds like – buy a property, fix it up, flip it for a profit.

Of course, the reality might not be as smooth with every deal, but there’s a lot of money to be made in real estate this way.

Live-in and Flip

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You can also opt to buy property and live in it while you do any repairs and then sell it for a profit once you’re done fixing whatever needs fixing.

Then, once you’re ready, sell it for a profit.

Buy Properties in Up and Coming Neighborhoods (Hold and Sell)

The third way to make money flipping houses is a strategy called hold and sell. Essentially, you buy properties in up and coming neighborhoods and hold them while they appreciate in value and then sell them for a profit.

Choosing a Real Estate Investing Niche

Before you get into real estate, it’s best to choose a real estate investing niche so that you can focus your efforts on just a few niches. You don’t want to be all over the place when it comes to real estate investing. You want to have a clear strategy in place so that you know when you’re on track and when you’re not.

Before you get into real estate, it’s best to choose a real estate investing niche so that you can focus your efforts on just a few niches. You don’t want to be all over the place when it comes to real estate investing. You want to have a clear strategy in place so that you know when you’re on track and when you’re not.

How to Flip Houses | Flipping Houses 101 | How to Get into Real Estate Flipping Houses | How to Wholesale Houses | Wholesaling 101 | How to Become a Wholesaler | Rehabbing Properties | How to Rehab Houses | How to Make Money Rehabbing Houses | Make Money with Wholesaling

The following are real estate niches you can choose from:

  • Raw land
  • Tax liens
  • Small apartments
  • Large apartments
  • Single Family Homes
  • Multi-family homes (Duplexes, Triplexes, and Quads)
  • Real Estate Investment Trusts (REITs)
  • Mobile Homes
  • Commercial property

Creating Your Business Plan

A business plan can help guide your decisions so that if you ever get stuck you can always refer back to it. While you don’t need it for funding your REI business, it can help to have it during the process, just so your lenders know you’re serious.

Your business plan should include the following elements:

  • Goals – What are your goals for the business? Do you want to make $20,000 a month in passive income? Is it to flip six houses a month? Write down your goals clearly. Use SMART goals.
  • Strategy – What’s your REI strategy? There are so many ways to make money in real estate so you’ve got to be specific about your strategy for making money. It might be fixing and flipping houses or it might be buying property to AirBnB. Or a combination of both. Write down your strategy.
  • Timeline – How quickly are you aiming to reach your goals? Five years? 10 years? Be realistic, but don’t be afraid to dream big either.
  • Market – Determining your market means figuring out what kind of properties you’re looking for. High-income? Low-income? Residential? Commercial? Chose an area you feel pretty comfortable with and start learning about the area you want to invest in. This can help you analyze deals better and determine which properties would be the best fit for your portfolio.
  • Criteria – As you saw above, when looking for properties, you’ll need to figure out what criteria is most important to you. You might want property only in NYC or you might only want to invest in properties with a certain amount of cashflow.
  • Financing Deals – How do you plan on paying for the properties you’ll purchase? Hard money lenders? Traditional financing? Cash?
  • Marketing – Your REI business plan should have a marketing section and should outline how you plan to market your business in a way that brings in motivated sellers. Will you advertise on Google? Use the MLS, online searches, direct mail, real estate agents?
  • How You’ll Do Your Deals – Your marketing plan should outline how you’ll do deals. Specifically, it should clearly define the steps you’ll take to secure properties and flip them.
  • Your Team and Systems – Your business plan should list everyone on your team by name and list their business name, address, and phone number or email.
  • Exit Strategies and Backup Plans – It’s best to come up with a few well-defined exit strategies for when you want to get out of a deal. What’s your plan B? Will you lease, rend and hold or use another technique? Write out all of the techniques you’ll use and all of your contingency plans.
  • Example Deals – Illustrate example deals that you’ll be making once your real estate business is up and running.
  • Financials – Detail your current financials. Do you have any money saved in case of emergencies? Repairs? Other things that might come up?

Creating Your Team

How to Flip Houses | Flipping Houses 101 | How to Get into Real Estate Flipping Houses | How to Wholesale Houses | Wholesaling 101 | How to Become a Wholesaler | Rehabbing Properties | How to Rehab Houses | How to Make Money Rehabbing Houses | Make Money with Wholesaling

If you want to be successful flipping houses, you’ll need a team of professionals that can help you close deals quickly and efficiently.

On your team, you’ll need a:

  • Real estate attorney – A real estate attorney can help you go over contracts and provide valuable insights into what moves you’re going to be making. Find an experienced attorney that can be available when you need them.
  • Mentor – A mentor can be crucial to your success as a real estate investor. Having one that can help you along the way to can help you avoid making common mistakes most beginners make.
  • Mortgage broker/Loan officer (for traditional loans) – If you’re going to be using traditional financing, find a mortgage broker or loan officer to help you get loans for properties you want to purchase.
  • Other Lender – If you’re not going the traditional financing route, you’ll have to find another type of lender to finance your deals, like a hard money lender.
  • Escrow Officer or Title Rep – If you live in a state that uses title and escrow companies – like New York), you’ll need one of these lovely people on your team to help you close the deals much quicker.
  • Insurance Agent – An insurance agent can help protect your properties and your business in the event that something happens. Don’t skimp on insurance. It’s better to have too much than not enough coverage.
  • Accountant – An accountant can help you keep your business financials in order and file your taxes. It can be pretty complicated if you’re not experienced with it, so get an accountant on your team as soon as possible.
  • Real estate agent – An experienced real estate agent (especially one who works with investors already) is an invaluable member of your flipping team. They can access properties that might not even be on the market yet and they can make great resources for contract real estate work like referring buyers and bird dogging.
  • Contractor or Handyman – A contractor or handyman is a necessary part of your team because when repairs need to be done, you’ll need someone who can do them for a fair price and fairly quickly.
  • Property Manager – A property manager can help you manage your properties. Unless you know how to fix toilets (and other issues that might come up), you’ll need a property manager.

Start building your team (and your relationships with them) as soon as possible so that when you’re ready to close your first deal, you’re prepared to contact them with any questions or assistance.

Investing in real estate comes with risks, which is why many investors choose to form a business and use their business name to purchase real estate. Some recommend an LLC to limit your liability in the event that your business goes under. If that happens and you have an LLC, your personal assets will be protected. So, think about what type of business structure you want to form for your real estate investing business.

Rules for Success

Being successful in real estate means knowing the rules, which includes:

The 2 Percent Rule – The 2 percent rule says that monthly rent should be about 2 percent of the purchase price. For example, a home worth $100,000 should be rented out for $2,000 per month. A $200,000 house should be rented out for $4,000 per month. The closer to 2 percent you can get, the better your income will be.

The 50 Percent Rule – The 50 percent rule can help you predict how much a property’s expenses will cost you every month. It states that 50 percent of your income will be spent on expenses other than the mortgage. Divide the monthly income of a property in half to figure out how much you’ll have left to pay the mortgage (the principal and interest).

The 70 Percent Rule – The 70 percent rule is used to determine the maximum price investors can use to pay for a property based on the after-repair value (ARV). This rule says that you should only pay 70 percent of what the ARV is, less the repair costs.

Think About Selection Criteria

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When it comes time to analyze deals and determine whether a property would be a good deal, look at factors like:

  • Neighborhood
  • Town
  • Cash flow
  • Property size (square footage)
  • Number of units
  • Lot size
  • Appreciation potential
  • Property condition
  • Cap rate

Consider Real Estate Investing Software

These days, it’s a lot easier to invest in real estate than it was 10 or 15 years ago. There’s all kinds of technology that makes it easy to help you run a successful real estate investing business.

And one thing that can tremendously help your business is real estate investing software that can help you analyze deals and close them efficiently.

Software like this can also help you manage properties, track leads, and more.

Where to Find Real Estate Investments

There are tons of ways to find good real estate investments, but you have to know where to look. Here are a few places you can try.

  • Craigslist
  • LoopNet
  • Newspaper
  • FSBO
  • Worth of Mouth
  • Outbound Marketing

How to Get Funded

How to Flip Houses | Flipping Houses 101 | How to Get into Real Estate Flipping Houses | How to Wholesale Houses | Wholesaling 101 | How to Become a Wholesaler | Rehabbing Properties | How to Rehab Houses | How to Make Money Rehabbing Houses | Make Money with Wholesaling

If you don’t have your own money, you’ll need a lender to fund your deals. A lender could be a traditional mortgage broker or loan officer or it could be a different kind of lender, such as a hard money lender. Lenders to consider include:

  • FHA loan
  • NACA loan
  • Conventional loan
  • Commercial loan
  • Hard money lenders
  • Private money lenders
  • 203K Loans
  • Home equity loans or lines of credit
  • EIULS, Life Insurance, Roth IRAs, and More

Ready to Start Your REI Business?

Starting an REI business isn’t easy, but it can be completely worth it once you get things running smoothly. As long as you get the tools and resources you need to run like a well-oiled machine, you’ve got the formula for success (and, you know, all the information I just gave you). So, get out there and start investing.

Author

Founder at The Ultimate Freelance Guide and author of The Ultimate Guide to Using Blogging to Boost Engagement and Drive Sales and Copywriting vs. Content Marketing: A Guide to Understanding the Difference Between the Two and Using Both for Maximum Engagement. Her work has been featured at USA Today and Small Biz Daily and she's written for clients like Columbia, LifeLock, eSurance, Anthem Health, USAA, Rev.com, Princess Cruises, and Rodan + Fields, among others.

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