Recently I’ve had more conversations with rehab flippers complaining about the FHA seasoning guidelines than I can remember. For those of you who are not aware of the guidelines, in short if a person is getting FHA financing, the property they are purchasing needs to be owned by the seller for 90 days before they will finance.
Well, here is a simple solution to your problem.
locate a potential buyer who is pre approved
accept a 3 to 5 percent down payment
place them on a 3 month lease purchase allowing them to lease the property until the FHA time guidelines are met
explain to them that they shouldn’t apply for any credit or make any large purchases until they close on the house
If their pre-approval expires have them renew
set up close date & collect your check
Obstacles many times get in your way, but with an understanding of your desired goal it should not be hard to look at any situation and come up with multiple ways to solve them.
Your real estate education is the key to you establishing yourself as a real player in the game. With the proper education it will position you to dominate your market and also convert deals you once walked away from. Imagine for a moment, you having the knowledge to recognize a deal within minutes of seeing the needed information.
Over the past several weeks I have received many calls and emails from people asking a myriad of questions on deal structuring, lead generation and funding. The topic of funding is dear to my heart due to the fact that when I started out investing it was without a doubt the one issue (lack of funding) that kept me from aggressively pursuing the kind of deals I wanted to do. Well, that day is long gone!!!
You know I love to give helpful information to you (my readers). I don’t want you to have the struggle I had with funding so, I’m giving you wonderful insight into how you can get all the funding you need for each and every deal you do. Funding Information
First YOU must educate yourself. Education is the key.
Money management during any real estate investment venture is an essential skill. If this is your first time flipping a property it is probably more important on the first flip than any other as you need to fully realize how much things cost and how quickly those expenses can up. It is so simple for the budget on a house flip to get completely out of control. For this reason you need to take control of the financial situation from the very beginning.
Begin by establishing a realistic budget for the entire project. If you find yourself spending more money in one area than you had originally planned you need to either revisit the initial budget and plan for adding more money to the pot or you need to make cost lowering adjustments elsewhere along the way to recover the excess. You will need to have a firm idea of the projects you are going to tackle, big and small, as well as the costs involved in each project. Take a walk through a hardware store and get a firm grasp of today’s prices on the hardware, equipment, and supplies you will need to complete the job.
Use contractors when necessary but sparingly. There are times when it will cost much less to use a contractor on a project than to muddle through on your own. There are also times when local laws require a contractor. You need to use contractors for these times but you need to avoid paying the princely labor costs contractors charge for things that you could easily do yourself. You never want to spend a penny on a flip that you don’t need to spend and labor costs are a huge budget buster.
Get permits first and up front. Time is money when you are flipping a house and once you start the work that time is precious. Make sure you have all the permits you need and that they are paid for before you begin the project in order to save time and money after the project has commenced.
Then create a habit of accounting for every penny spent throughout the day at the end of every day. This becomes a good habit to have for your first and all subsequent flips. By doing this you will have a solid grasp of how much money you are spending as well as how quickly you are spending it. You will need money to spend on little things throughout the course of the project so if you are spending money too fast up front you may not have the money needed to take care of the small details that mean a lot when all is said and done.
One huge way to better manage your money during a house flip is to make a conscious decision and consistent effort to work according to your tastes. Chances are quite good, especially for a first flip that you will be working on a house for those who have less financial means than you may have. For this reason you need to keep your project within the budget of your buyers. This will save tons of money. In other words a lower income community cannot absorb the costs of granite, marble, and hardwoods in most situations so don’t go to that exsteem.
In order to turn a solid profit when flipping a house or doing any type of real estate investment you absolutely must have a firm grip on your money, where it is going, and what your plans are for the money. The less money you spend the more money, in many cases you stand to bring home in profit. Spend the money you need to spend in order to improve the value of the home but avoid luxury expenditures that aren’t necessary for the neighborhood or the home in question in order to maximize the potential profits you can bring home.
First I want to thank all of you who read, comment and enjoy this blog, I appreciate all the emails you have sent.
I’m going to tell you briefly about how you can save money on your next flip. I know, I know…. I had you all following my flip. Well it came to a screeching halt. I had a bad water meter in the house and need some plumbing completed before I can finish the job, plus come to find out the cities shut off valve at the street is broken, but anyway let me give you all this money saving info. It’s going to be short but sweet.
If you’re flipping houses it is HIGHLY important that you create a product price list, I do this in Excel. I make a list of the products I’ll use rehabbing the property from paint, drywall, carpet, supplies, cleaners and so on. I leave a space to put the price of each product.
Once I have a list of all the materials and supplies needed I can figure my cost for those products (I purchase all my materials and avoid contractor markups). Now, wherever you purchase your products; (Home Depot, Lowes) take the list and order all your supplies at once, asking them to submit it to the “Bid Floor” so you can get a nice discount as opposed to paying full retail. Doing it this way you can save about 15% to 20% off the retail price.
One nice little tip before I go. I’ll get my price, from lets say Lowes and then go to Home Depot with the list and explain to them I’d rather do business with them and if they can beat the price I have quoted then they will get my business. When you have competing stores in an area they will usually beat the price by 5% to 10%,.
So see you can save 20% to 30% on your material cost if you apply this correctly.
All I ask is that when you do this, come back and leave a comment telling how well you’ve done. You can thank me then and buy me a coffee later.
Tare out is totally complete. I just wanted to post a short follow up to point out a few things to keep in mind that will help you save money along the way.
1. get the largest dumpster available for all the trash and tare out material.
2. have your own tare out crew.
3. make your decisions on color, cabinets, flooring, windows and anything else your changing prior to tare out.
4. purchase all your supplies in 1 large order at places like Home Depot and the like. talk to the store manager and ask for a large purchase order discount. you usually can save about 5 to 20 percent over purchasing everything separate.
5. get labor only estimates from contractors, there are contractors who will do this. read this post on how to save money when rehabbing and dealing with contractors.
6. check on your work site to make sure everything is flowing as it should so you can meet the schedule complete date.
Next Post I’ll have another video of some of the work completed. I’m so excited I can’t stop thinking about the whole process. Talk to you soon.
“greatness come with a price, sacrifice. so what will you sacrifice to become great”
When starting a flip it’s best to have several components in place so that you get the most for your money. You should have your tare out crew, repair/contractor and vendors in place. In this edition I’m covering the tare out being performed, plus the added surprise we had while taring things out.
It’s can be cost effect to have a separate tare out crew of two to three people, make sure they know and fully understand how you want the tare out completed. You can save money utilizing a small crew like this as opposed to having your contractor charge you to tare things apart and put them back together again. Outside the cost of the dumpster this tare out from the completed state you saw in the first video cost around $100.00
We had a small surprise, while taring out the old, it was discovered that there was a water issue. A water pipe had busted and the drywall was soft and wet with some mold appearing. The lower half of the drywall separating the laundry area and baths had to be ripped out as well. While removing the kitchen counters there was soft drywall as well.
Lesson to be learned here is that you must prepare for surprises whenever rehabbing a property.
When you start a rehab set a budget, get your estimates for the work, when you have those totals add an additional 20% to 25% to the total cost to cover unexpected things.
The budget for our flip is $10,000 so we factored an additional 25% to cover things like this so our total budget on the flip is $12,500. If we hadn’t factored things in this manner these surprises may have ruined or flip.
First I would like to extend a heartfelt thank you to each and everyone who has subscribed to this blog, given feedback or comments. I also want to give a “your welcome” to those of you I have personally spoken to or corresponded with by way of email and you expressed to me that what we discussed was helpful to your investing career.
I’ve been asked on several occasions to share an actual Flip/Rehab project that I’m working on. As of mid March a property that we had sold came back to us so we have decided to do just that (you ask for it and we provide it). Through several post I’ll take you through the process of our Flip/Rehab from start to finish. Below you will find the orignal video we shot of the property last year and in future post you will see the progress we make.
If you’re looking for investment properties in the NW Ohio area please follow this link so you will have access to the best available properties that will allow you to cashflow after all repairs are completed.
What you don’t see on many of the television shows about flipping houses are the many sad tales of promising flips gone wrong. These epic tales of woe are often the precursors to financial hardships for quite some time as those who fail at their property flips work on recovering from their heavy losses and moving on with their lives. Some are hit harder than others but the snowball effect of a bad flip are often not even hinted out on the prime time televisions shows that are so proud of the many success stories that arise because of serious and studious efforts in the house flipping arena.
If you are planning to flip a house for a real estate investment you really need to take a step back and decide that you are absolutely not going to be one of the house flip sob stories that are rumored about in Internet chat rooms. In fact, you want to be listed among the success stories. Unfortunately that takes a great deal of proper planning that is almost never shown on these television shows. In fact, to put forth your best effort you need to devote as much time to studying and planning properties, prices, and home values in your area before you even begin to search for your first property to flip as you need to invest in the entire process of actually working on your first flip. In other words, months worth of planning need to go into your first property pick in order to lower the risk of failure and to greatly improve the odds of success.
The second thing you need to do when planning your first flip and avoiding a sad tale and a sob story is to be realistic and avoid great expectations. With your first flip you are darn lucky to turn a profit at all. If you are expecting to make more money on your first flip than you made last year as a full time employee you might need to make other plans. The first flip rarely goes as expected.
Third, you need to set aside at least twice as much money (preferably three times as much) as you think you will need for the work on the property in order to cover the actual costs that will be needed. There are inevitably tools, permits, supplies, and labor that was not counted in the initial budget figures as well as the tendency to seriously underestimate the cost of the materials that will be needed in order to get the job done. If you don’t have that much or can’t spend that much and walk away without a loss then the property you are considering might not be the best property for your first flip.
Finally you need to plan everything. Every day needs to be fully planned before you show up to work on the property and you need to have all the materials you will need on hand from lunch to drinks, to tools and supplies. Trips to the hardware store, lunch breaks, and coffee runs quickly kill a day and any productivity that may have been made during that day. Avoid these costly delays by proper planning and you will discover that you have a real estate investing success story worth writing home about.
When it comes to making money in the business of flipping houses and other real estate investments you will find all kinds of do’s and don’ts along the way. The truth of the matter is that these are extremely useful whether this is your first house flip or you have been flipping houses for years. In fact you might just find that you can learn something new on occasion by reading lists such as this even if you’ve been flipping houses for years and have many successful flips under your belt.
1)Don’t forget to check out the neighborhood before you buy. You will want to make sure that the property you are considering is a good fit for the neighborhood. You should also take the time to make sure that the plan you have in mind for the property will match well with the other neighborhood residents in order to guarantee a quicker sale.
2)Don’t blow your budget without just cause. Your budget is what you used to determine whether or not the house would be a profitable venture. If you blow your budget and cannot recover the extra money you’ve spent in the selling price on the house you will have seriously cut into your profits if not eliminated them all together. The goal in property flipping is to get in and out quickly and spend as little money as possible in order to make as much money as possible.
3)Don’t forget to set daily goals and hold yourself accountable to those goals. If you don’t reach your goals for the day it can set the entire project back by as much as a month depending on the goals and what has to be rearranged as a result. Stick to your timeline and your daily schedule in order to avoid potentially costly delays in time and money.
4)Don’t neglect the exterior. Curb appeal is what brings buyers into the property. If you spend all your money, time, and effort making improvements to the exterior of the home you will have little left to make the outside appealing to potential buyers. A homebuyer is in the market for the entire package. A home that looks run down on the outside leaves the impression of being neglected on the inside and many potential buyers will never walk inside if the outside looks forlorn.
5)Don’t spend money you don’t need to spend. While it would be great to put in granite countertops and gourmet kitchens into every home it isn’t always practical and this is often money that will not be recovered, particularly in homes that are in marginal neighborhoods. If you want to get the most for your money avoid costly expenses that aren’t exactly necessary for the successful completion of the flip. Resurface bathroom fixtures rather than replacing them if possible and use new cabinet doors or hardware rather than adding new cabinets all together to cut down on expenses. In other words, salvage what you can, fix what needs to be fixed, and add a few cosmetic touches before moving on.
The market for real estate is a very fickle market. Avoid risking too much time and money on a property that isn’t going to recover those added touches and expenses. Instead hold onto those ideas for higher end flips once you have a few successful flips under your belt.
While many people have very specific dreams of enjoying the bountiful profits that can be made from flipping houses very few people put too much thought into the process or any formulas that might be pertinent to success when it comes to flipping houses as a real estate investment venture or for the sake of building a nice comfortable lifestyle or retirement. You will hear a lot about the things not to do when it comes to flipping houses but very few people take the time to mention the things you absolutely must do in order to successfully flip a house and thus begin your ride on the road to real estate investment riches.
1)Do put everything to pen and paper and plan it out carefully before you begin. If you are going to enter into this to make money you need to treat it like a business. This means you need to have a plan of action and make every effort to work towards carrying out that plan.
2)Do establish a budget for the entire project. You need to have a plan for how much money you are willing to invest in the property itself, how much for renovations, and how much money you need to make in order to be a worthy investment for your time and labor. A house flip is a lot of work in order to pull it off successfully. You want to have a good idea of how much homes in the neighborhood are worth, the value of your property as is and the estimated value of the property once improvements are made. In addition you should also have a pretty firm grasp of the costs involved in making the repairs in order to create a realistic budget for the entire project.
3)Do have an inspection. This is the single most important detail that can save you a great deal of time, money, and heartache when everything is said and done. Be prepared to walk away if the inspection determines that there is more work needing to be done than simple cosmetic repairs. You want to make changes that people can see because those are generally the changes that drive up the cost of the house. You want to avoid needing to make changes and improvements that aren’t visible but are very necessary. If you need to invest a lot of money and labor into the house you need to seriously consider the realistic profit potential the property offers. If it isn’t significant then you need to walk away before the property becomes a real estate investment money pit.
4)Do know the neighborhood and plan your flip according to the needs of the area rather than your personal tastes and needs in a home. This is another thing that many first time flippers forget. This is not a personal project it is a business project and you need to treat it as such. Keep costs down and feelings out.
5)Do remember that you are in the market to make money not waste money when it comes to establishing an asking price for the property. You’ve poured blood, sweat, and probably more than a few tears into your flip but you cannot set the value of the property by the effort you’ve placed into it. Have realistic expectations of how much you stand to earn from your efforts and how much you are willing to go down on the price in order to walk away with some profit in your pocket.
You should also take a moment to reflect upon the fact that many first time flippers actually lose money on their first flip. If you turn a profit at all, even a small profit you have learned many valuable lessons that you can carry with you into future flips and make more money. More importantly the lessons you learn from your first flip are lessons that money really cannot buy so it is worth a lower profit or even taking a slight hit if your experience makes you even more money in the future as you continue along your real estate investment path.
