A house flipping coach is a real estate professional who provides guidance and advice to individuals interested in buying, renovating, and reselling homes for a profit. A real estate coach typically has extensive experience in real estate investing and can provide practical tips, tools, and strategies to help their clients succeed in the competitive world of house flipping. Read this intro one more time!
Never pay for a house-flipping coach or mentor. Everything you need to know is available for free on the Internet. Learning to flip houses is not hard; the practical experience is the challenge. I have been flipping houses for over a decade and will be your house-flipping coach for free.
In this article, I will show you everything you need to know to flip houses. Please take a look at my bio to see the experience I have. At the time of this article, I am working on two house flips. The house on Williams, which may end up being a rental, is currently being renovated. I just closed on the house on Crestwood and will start the renovation soon. You can see all my deals here, and I will share the actual numbers on the investment.
Do I Need a House Flipping Coach to Flip Houses?
You don’t need a house-flipping coach or a real estate investment mentor.
The Only Thing That Matters
When flipping a house, it’s essential that you purchase the property at a significant discount to the market value. Once you buy the house at the right price, the rest of the house flipping is straightforward. The next steps will involve renovating the property and selling it. At this point, a general contractor and real estate agent would be more valuable than a house-flipping coach.
Unless this coach finds you deals, there isn’t much they can do. Worst case, the house flipping coach will mislead you on the price you should pay so that you can get a deal. All the coach can do is charge you money and give you vague information available elsewhere for free.
I don’t mean to imply that all coaches are unethical. It’s just that there is not much a house-flipping coach can do for you that you won’t find in this one article. All you need to do to flip houses is read a little online and study the free articles on the Real Estate Adventurer site.
The Steps to Get Started Flipping Houses
The steps to flipping a house are simple, and you don’t need a house-flipping coach. I have outlined the six steps you must follow when flipping a house. Once you understand this, you can get more information by reading my house-flipping guide for beginners. After that, find your first deal and buy your first house.
1. Stop procrastinating
The most crucial step for flipping a house is to stop studying and flip a house. Many first-time investors, myself included, spend too much time analyzing the business. A beginner investor should concentrate on finding good deals, not endlessly studying the topic and wasting time. And yes, working with a mentor wastes time; buy your first property.
2. Prepare Finances
If you have the cash to fund the flip, this step is unnecessary. However, even an avid real estate investor usually funds real estate investing with a loan. Before prospective investors begin their first project, they must determine how it will be funded.
Determine how you will get the money for the flip. Options are a traditional mortgage, a commercial loan for a local bank, an equity loan on another property, or a hard money loan. For more information on funding, check out my article about financing real estate purchases.
If you need to go the hard money route, here is an article that will teach you everything you need to know about hard money.
3. Purchase a House Below Market Value
To make a profit flipping a house, you must buy the home below market value. Ignore what you have seen on TV; flip profits rarely come from being the highest bidder and doing fancy interior decorating jobs. Perhaps you can make money buying at market value when the markets are wildly appreciating, but this is a speculative endeavor at best.
When flipping a house, it is crucial that you purchase the property significantly below market value. Profits are made by finding problem properties you can acquire below market value. This problem may be with the house itself or a personal issue the owner is facing. After you buy the property, you fix the problem and sell the house at market value.
4. Pay the Right Price
When purchasing a house to flip, you should invest no more than 70% of the market value of a property. Remember that this 70% investment must include the purchase price and renovation costs.
The cost of real estate transactions is high, and many things can go wrong. This cost makes the 70% number crucial. Now is an excellent time to read what Benjamin Graham, Warren Buffet’s form teacher, said about having a margin of safety.
5. Mange the Renovation
Once you have a suitable house at the right price, it’s time to start the rehabilitation. Be careful, and don’t overdo this renovation. Your goal is to fix the problem that enabled you to buy the property below market value; it’s not to provide a creative outlet.
During the renovation, hire professionals to complete the project on time. You should act as the general contractor and manage the job, but never do the work yourself. You aim to renovate the property to the standards of the other houses in the area. Expensive fixtures and countertops rarely increase the appraisal value unless that is the norm for the neighborhood.
6. Sell the House
When selling the house, engage the services of a real estate agent. These professionals know how to vet buyers and push the sale through. Don’t try to save money by listing it for sale yourself; that is too much hassle.
The goal at this stage is to sell the house as quickly as possible while getting close to market value as possible. Let a professional handle that for you; it’s money well spent.
When selling the house, remember this rule: Get the fast buck, not the last buck. This means you should sell the house quickly and not hold out for the highest possible price – a price that may never come.
How do I Find Below Market Deals?
The market value of real estate refers to the estimated price that a property would sell for in the current market conditions. It is the price that a buyer and seller would typically agree upon if the property were to be sold in an open and competitive market where both parties have equal bargaining power.
The Challenge to Buy Properties Below Market Value
If properties are widely known, competition will raise the price near the market value. Finding a good deal, which can purchase below market value, is the most challenging part of flipping a house. A house-flipping coach will not be able to help you with that.
I’ve over 15 years of experience buying investment properties, and I’ve purchased nearly 100 investment houses. I can’t teach you how to find deals you can buy below market value. If it were easy, everyone would do it, creating a market that would raise the price.
The Type of Properties that Can be Bought Below Market Value
Below market opportunities generally fall into two categories, and most profits are made when the house fits both types.
Houses that no one else knows are for sale
Generally, these are houses in which the buyer needs to sell the house quickly. Perhaps they have inherited an out-of-state property or moved and can’t afford two payments. These owners don’t want to put the property on the market because of the time required to sell or the effort to get the property ready. In many cases, they want the property disposed of quickly and will give up significant equity for someone to take on this chore.
Houses that no one else wants
These houses have a problem few want to deal with. Problems such as mold, foundation problems, termite infestation, or other physical problems. Possible issues may also include title problems or scary and troublesome tenants. You can often get these problems at a massive discount, solve the problem and sell the house at market value.
What to Watch Out For when Flipping a House?
Flipping houses has pitfalls. It can be a high risk endeavor, and a house flipper should understand the perils before buying their first investment property. There are some things to watch out for, and many house-flipping coaches never mention these.
Paying Too Much
By far, the most damaging problem you will face is paying too much for the house. Almost any other issue can be overcome by paying less for the property. Be sure you accurately calculate the market value and keep your costs under 70% of that value.
Overvaluing the Property
Another trap is valuing the property too high and thus paying too much for it. Do not cherry-pick the comps when assessing the value of a property. Don’t just look at the high comps that make the deal work. Instead, take the average of all the comps and remove any high-priced outliers.
You need to determine the value of the property. Don’t rely on the advice of a coach with no vested interest in the deal. And certainly, don’t listen to someone trying to sell the property.
Paying Too Much
Understand that when selling the house, the appraisal is often the driver of the selling price. Most buyers use a home mortgage to purchase the property, and the appraisal value binds the mortgage amount. The house flipper should base all decisions on the eventual appraisal value, which should be the market value, and not on the hope that a cash-rich buyer will pay higher than the appraisal.
Flipping a house is challenging, but you don’t need a house-flipping coach. The goal of the house flipping coach is to sell you a coaching program, but the information you get in exchange is rarely worth the cost. Everything you need to know to flip a house successfully is available online or on this site for free.
The most challenging part will be finding properties with a significant discount, and the coach will be unable to help. At best, finding deals will be on you; at worst, the house-flipping coach will encourage you to spend too much on the property.
Uncovering these deals is one of the first steps to building a successful real estate business. You don’t need a paid coach holding your hand every step of the way. Find a deal and start your first fix and flip.