Fixing and Flipping Houses: A Beginner’s Resource

Careers in real estate aren’t limited to being a real estate agent, broker, or other vocation where certifications are required.

 

Anyone can make money in the world of real estate through several strategies to build honest, legitimate wealth in a safe fashion. Channeling the entrepreneurial spirit, real estate wealth can be built through investor tactics.

 

One approach is fixing and flipping.

 

What is “Fixing and Flipping?”

PropertyRadar says that the purpose of the “fix and flip” is to get immediate cash by “fixing issues with the property, thereby maximizing the price. The typical time to flip is two to six months.” As opposed to simply selling the property in its current condition for less money in a shorter amount of time (referred to in the blog as a “quick flip”), fixing and flipping a house means repairing and/or remodeling the house.

 

So, buying a cheaper property, knowing how to renovate it, and then being able to re-sell—or “flip”—the property is the plan. In addition to making a quick return on investment, there are also no engagements with tenants or worries about the property over time.

 

The cited trade-off is that there’s a required repetition of the process if one wants a steady profit. Fixing and flipping a property only requires commitment to a property if it’s currently owned by the real estate professional, so it allows fluidity of schedule in that respect. While there’s not necessarily a dedication to a single property, there is a dedication to the process if one wants to be in real estate over time. Unlike a typical job that may have a routine schedule, those making money through fixing and flipping must create their own work schedule and correct whatever problems are presented by the property—either through repairing the problems personally or paying someone to bring the property to its desired condition.

 

Information provided by media outlets such as The Washington Post, Fortune, The Week and others creates the image of a national trend that ebbs and flows based on economic factors and the popularity of the pursuit through nationally-watched television shows.

Wikihow’s article “How to Fix and Flip” lists it as a nine step process. Those steps include creating a team of personnel, finding target properties for the process, making a deal on the property that is profitable, getting funds for the deal, the actual rehab of the house, and selling the property.

 

In a blog for CRE Online, Denver Real Estate Attorney William Bronchick gives his “Flipping Houses – 7 Ways to Flip a House.” Bronchick actually offers six explanations of legal strategies and explains how the process of fixing and flipping is done illegally.

 

Bronchick gives his readership a few strategies here. Among those are the option to “Buy, refinance, and lease,” as well as work with properties that are in the pre-construction phase or sell information about a possible property investment for a fee (referred to as “scouting” and being a “bird dog.

 

CNBC’s article House flipping: 5 tips for big returns” says that the tricks to a successful house flip include stepping into the mind of the targeted buyer and knowing the real estate market.

 

Getting the Money for a Property to Fix and Flip

Anyone wanting to fix and flip a property doesn’t have to use their own money. According to Fit Small Business, there are four ways to get a loan for a fix and flip. The four options available include online mortgage lending (like LendingHome), traditional hard money lenders, private money lenders, and financing through banks. Money Crashers reminders the readers of its blog that those pursuing money loans will need to meet credit requirements. The blog also gives information about the amount of time it might take to get the loan, the requirements for a loan, interest rates, and other notable criteria.

 

Quick and Dirty Tips has a separate list of four ways to get money for a property. It makes the distinction between borrowing from friends and family (who may have an emotional connection to the person) and real estate investors, which may be anyone willing to give money for such a project.

 

A person willing to invest in properties may be found through any number of ways. LendingOne tells readers of its blog that the term “hard money” comes from its association of being used for a “hard asset”. It offers several ways of finding a private lender, including real estate broker recommendations, trade organizations (like the American Association of Private Lenders), and attending real estate clubs. (It should be noted that part of GREEN’S business model is the Real Estate Investor’s Club, thus underlying the importance of these local groups for investors.) The blog has a specific list of questions that should be asked to private lenders, as well as a list of cautions that should be observed when wanting to do business with a private lender.

 

Fixing the Home for Resell

Bringing the property to a condition for a resell is the “fix” part that is necessary for the flip. It’s the investment part that allows for a property flipper to maximize their return when the house is on the market again.

 

For almost two decades, property investor Steve Cook has fixed and flipped properties. Blogging for the REI Club, he outlines his rehabbing process that lays out a fourteen step checklist with different phases. The agenda for the blog is to show that things like marketing the rehabbed property, putting down carpeting, demolition, and putting up sheet rock must be done in a certain order so as to see a proper completion. It’s imperative that the rehabbed structure be brought up to the necessary property codes of the area. Such information may be found through the counsel of a general contractor or through information provided via the websites in a rehabbers area.

 

The question of “should a contractor be hired?” may depend on the specific situation of the property’s rehab. What experience, if any, do those involved in the property resell have with repairing and remodeling a structure? How familiar are those who could work on the property with the codes and regulations in the area? How efficient are the potential non-contract workers at the specific repairs and remodels needed for the job?

 

If those expected to work on the property lack the necessary tools, experience, and knowledge that comes with professional help, then those looking to rehab the property should consider hiring a contractor for ethical, legal, and safety reasons.

 

Bigger Pockets makes a distinction between workers who may be contracted for construction work and a general contract. Per the blog, a general contractor “is someone who you hire to manage, coordinate and complete a rehab project. They may or may not be specific tradespeople, but they are often a sort of “jack of all trades” who have detailed knowledge of how to complete the project. They are often responsible for making sure that the project comes in on time and within budget, and they hire and manage sub-contractors, such as electricians or plumbers. Most of the time you will pay and direct the general contractor, who will in turn pay for materials and manage the sub-contractors.”

 

The blog says that “most jurisdictions will allow you to act as your own general contractor.” If one opts to function in this way, then the question becomes whether or not they possess the needed skills to save time and money. Serving as a general contractor for the construction can save money, assuming one knows what one is doing. However, if a person doesn’t have the skills to do the work themselves, they can save time and potential costs of materials and labor by hiring an experienced general contractor.

 

Things to Consider with Fixing and Flipping Properties

Once the property is at a condition that’s suitable for resell, the owner of the property may put the property back on the market. If one is looking to make fixing and flipping a long-term career, then some of the money made from the sale should be set aside to invest in the next property.

 

Fixing and Flipping is only profitable if one can buy a property, make the required renovations, and then re-sell the property for a profit. This means that the property purchaser must be willing to handle every task required for such an endeavor. Finding a worthwhile property, putting in the necessary work to bring it to a desirable condition meeting all legal standards, and then making more money on the property than the amount spent.

 

It’s a major dedication, and not one for the faint of heart. But if one is willing to do the work, one may reap major financial awards.

One Comments

  • Deb Pearl 23 / 08 / 2017 Reply

    I have been thinking of maybe buying and flipping a home in my neighborhood. I’m glad you talked about that it doesn’t have a schedule and that I need to make my own to get the work done. I will take all your advice into consideration before I dive into doing a house flip. Thanks!

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