Profiting From Wholesale and Fix and Flip Properties
Where do I find the best investment properties? What are the best investments for big profits? How do I make big money in real estate? These are common questions we get every day.
Investors, especially new investors have had a great ride for the past 5 years or so as home values plummeted and cash flow was strong and readily available. Now we are in a different time.
Inventory of low priced properties are harder to find and there are many more investors investing in real estate than ever before. please note :: I often recommend resources, some I receive an affiliate commission for, these all help to keep this site free for you!
Investments that make sense when inventory is scarce
When inventory is scarce the true entrepreneur in you comes out. The active investor in you comes out.
Indeed you need to roll up your sleeves and dig in, but this is where your daily activities and acquired skills come into play. In exchange for your added diligence, there is much reward awaiting you as you master these investment styles. When it is hard for the average person to find investable property the active investor seizes the opportunity.
- Invest in Fix and Flip properties: for quicker large short term profits
- Invest in Wholesale properties: For quickest turn around profits
Where to Find the Great Real Estate Investing Deals
If you have ever wondered if there is a “good ole boys network” (simply slang for a network of likeminded individuals who share a common interest and goal) when it comes to real estate investing, you are right, there most certainly is!
While it is not all “boys” anymore, the great deals tend to go to the people who have been in the business longest and made the most connections. These deals never even hit the “open market” for you to find because they get offered to people like me who have been investing and growing our connections for decades.
It takes a lot of connections and networking to uncover the great deals. When enough people know about what it is you are looking for, eventually everyone’s objectives are found and shared with each other to create a win-win for all.
If you want to be one of these wholesalers or fix and flippers but don’t feel you have the networks built up or proper know how to execute these strong ROI investments you may want to see how easy it really can be with this FREE webinar Do You Want To Make More Money In Real Estate Part Time Than You Do At Your Full Time Job?
How To Take Advantage Of The Great Investment Deals
Find the win-win:
If I were to take all the lessons I have learned over the years it would be that (to benefit from any transaction or investment) it is best accomplished by creating a win-win situation.
Systems are probably the second biggest lesson I have learned over the years. When you are investing, find what works for you, write it down. Write down what you bought, where you found it, who did the work, etc. When you do a deal that worked well, simply document it and duplicate it. You never have to repeat a bad experience and you definitely want to repeat every win.
Create lists and keep a good database:
As the “ole” saying goes, "it is not what you know but who you know." Create numerous lists. Tradesmen. Buyers, Sellers, Real Estate Professionals. etc.
3 Skills to Successfully Wholesaling Real Estate
1. Understand people and build rapport:
People who sell their homes to a wholesaler do so because they have a problem that needs to be solved.. They have a challenge of some kind and cannot sell to the open retail (MLS ) market. The inability to sell their home is indeed a worrisome, stressful time. As the homeowner of a property they no longer want, often they can no longer afford to maintain the property. The homeowner has become emotionally disconnected from the property and it has now become a headache for them.
The homeowner is looking for solutions that are not able to be resolved themselves. This becomes your value proposition offering them solutions. You want to gain their trust and let them know you care and want to help and have their best interest in mind. It is about them knowing you want to create a win win situation or no deal.
2.Identifying the pains:
This is often an overlooked part and it tends to go much deeper than just identifying a physical problem such as electric, plumbing or structural issues. Most often these issues are causing deeper pains for the seller. On the surface you may see something that simply requires a contractor to come in and fix it.
The deeper problem often is not visible and requires social interaction skills to identify. Perhaps the family has no ability to pay for the repairs, perhaps the family inherited the property and does not know anyone and simply does not want to deal with the headache.
The challenges that each homeowner faces vary from person to person and they are often much deeper than the condition of the property. Successful wholesalers know how to create the trust and rapport to get the seller to share their true pains with holding the property. These pains often are deep rooted and emotional so do not just expect they are willing to share this with you. You want to assure them you are there to help them and not prey upon their challenging time. You want to be the solution to their problems. This is where you are branding yourself as the person (or company) that solved their problem.
3. Finding a win win solution:
This is what makes or breaks a successful wholesaler. Finding a solution that will help the seller accomplish their goals and at the same time generate a profit for you after executing your exit strategy. If a seller does not believe you have their best interest in mind, they will not trust you and will send you walking. Sellers are o.k. with you making a profit; this should be disclosed up front that you are an investor and you intend to make a profit. To the seller you earn this profit by solving their pains not by fixing the physical elements of the property.
Being a win win problem solver will catapult your business forward as this is a small world and happy sellers will share their excitement. The opposite of course also happens. If they feel they were taken advantage of by a wholesaler who was not upfront and transparent with them will give you a wholesaler a bad name real fast!
7 Attributes to Successful Fixing and Flipping Real Estate
1) Proper renovations and fixes:
I have seen many investors who want to just put a new coat of paint on the walls and clean up the yard and call it a renovation. I have also seen many new investors over improve; it is easy to get caught up in things you like and renovate to match your taste.
Renovating to match the quality of neighboring homes and price point of the neighborhood is paramount and needs to be adhered to always. Replace things that better serve replaced, and fix what makes sense to fix.
Mastering this will make your budgeting easier and your renovations more successful. When possible tour some neighboring homes that are for sale and see what the area homes consist of.
2) Create accurate budgets:
The formula seems so simple. Purchase price of property plus acquisition cost plus renovation costs plus holding costs plus liquidation costs, equals your breakeven point. Subtract this number from your sale price and you have your Return On Investment (ROI).
As easy as the formula is,coming up with these accurate numbers is paramount for success. If you are new to this area of budgeting, I strongly suggest you have a mentor to help here as there is no one size fits all formula.
3) Knowledge of costs:
Knowing price per sq. ft. of carpet and tile will be important. Painting cost per room, kitchen replacement cost per linear foot, cost per square for roof replacement. Average cost for a bathroom upgrade. Etc etc.
While much of this appears to be guess work, as you become experienced in what prices are for renovation it becomes much easier to pin down an accurate estimation.
TIP: Keep a log of all these prices so you can easily reference them in the future, breaking these costs down to a per room basis or per sq. ft. or per linear foot basis will make creating a budget for your next flip much easier.
4) Having a contingency fund is also paramount
There is no way even the most experienced investor can account for every little expense that will occur when renovating a property because there are always unknown circumstances that appear when you start opening up walls and moving things around.
So how much for a contingency fund? Again no one size fits all and depending on where you are renovating, the renovations cost etc. this may vary. I typically will add 10 to 15% to total renovation costs.
5) Budgeting, don’t forget your holding (6 months recommended) acquisition and liquidation costs
- Financing costs (if you financed, assume 6 months)
- HOA fees
- Utility bills
Acquisition: closing cost on the purchase, title insurance, financing points for loan,etc Liquidations costs: closing cost on the sale, title insurance for the new buyers if required in your area. Realtor and or attorney fees.
6) Meanwhile during your renovations
While your renovation team is busy doing the updates you should be prepping for your exit strategy. Have your Realtors in place and have the marketing all lined up.
TIP: often on home renovation people get the house all fixed up and then do the yard work at the last minute. I prefer the opposite. Draw attention to your flip by doing exterior first. People watching the property will see a nice change and will eagerly wait to see what you do to the rest of the property. People buy curb appeal, it is always the first thing they see so get the curb appeal looking great first then you can start marketing early.
As the renovations are nearing completion you will also be nearing the end of your time commitment for this property. So this is a great time to start looking for the next flip. With all your real estate TEAM members in place you should have trained them as well what you want within a flip and they all should be eyes and ears on the market watching for you
Hopefully you stayed on budget and stuck to your plan. With the property complete and all realtors in place market and sell the property. Your advance diligence should have told you how to price it but as weeks or months have passed you will want to revisit the latest comparables to see where you are at. Price to match the market, do no price to match your emotions. The house will sell for what the market will bear.
Time to repeat:
Your future flips will be easier and perhaps more profitable.
The basics of wholesaling and fix and flips are simple. If you desire to be one of those who make serious income in this but feel you are missing the “how to” then this webinar on how to is for you.