If you’ve ever been curious to as to how real estate investors consistently make money with “Fix-n-flips” Here is your startup guide to learn how. There are three key factors to creating a successful business model for profits that they don’t teach you in those seminars people spend thousands of dollars on.
Funding
The first step is to have your financing figured out. This is an arguable statement. The reason I suggest this is if it’s a great deal, money can be easy to find. However, for those that suffer from paralysis by analysis, starting with finding money, is a first step to creating certainty or action. Many people use a combination of methods. One way is through private money from family, friends, or acquaintances that are looking to create a certain return on their money. Another source would be from Hard Money lenders that will loan money based on the value or profitability of a deal. You can find them willing to lend up to 90% of the purchase price and in some cases 100% of the fix. These financing options often require a large spread and have high-interest rates (anywhere from 8% to 16%). The key point to understand here is the importance of having financing in place. This is because homes that are sold at a discounted rate are in high demand and go quickly. I see more often than not, these homes are being purchased with cash and also have quick closes (7 to 15 days). The deal will not wait for you to figure out financing.
Finding
This comes down to finding a distressed home seller and solving their issue. What does that mean you ask? Finding someone that has to sell quickly, that may be willing to take a discount. They may be willing to discount a home’s value for a number of reasons (lack of funds to fix the poor condition, the urgency to sell because of financial hardships, the urgency to sell because of relational issues, etc.). There are a number of reasons that create situations in which people are willing to sell at a discounted rate. Hard to comprehend? Have you ever had donated items to Goodwill where getting rid of the object was more important than getting a monetary value for it? You just needed it gone? Same concept, just with a much larger asset. These deals can be found through a number of channels like wholesalers, bandit signs, for sale by owners, pre-foreclosures, divorces, homeowners with high debt & equity, vacant homes, and many more avenues. These examples are all found through public data sources. To further explore this, watch some YouTube videos from my friend Max Maxwell who is killing it in South Carolina. He is truly an incredible human that is giving back to the community by sharing valuable content in his free videos on how to create a business in finding deals.
Fixing
The key to fixing is understanding your local neighborhood values and current design trends. Neighborhoods sell in ranges. Therefore, you need to understand what the top dollar homes sell for vs. what the distressed homes sell for. Next is understanding the designer trends that sell in your local area. You can accomplish this by going into hundreds of homes in your market or area. This is called R&D (Ripoff & Duplicate, which is also known as Research and Develop). The final aspect of this is BUDGETING. You must have a set dollar amount and stick to the aspects that get the highest rate of return; kitchens, floors, bathrooms, & backyards. The construction for the before & after photos were completed by Trip with Urban Design Renovations, LLC.
If you’d like more resources or information on finding homes, reach out and contact me. I’d be happy to share more in-depth knowledge (602)-428-7200.
