As more and more people look into the idea of taking control of their finances and future,
more discover the art and science of flipping houses.
Here are some of the things we will cover:
- What is House Flipping
- Why House Flipping is One of the 3 Recession Proof Businesses Ever
- Flipping Houses with Bad Credit & No Money
- Finding & Identifying Deals: The 70% Rule
- When is a Good Time to Flip Houses
- Flipping Houses as a Side Hustle
- 2 Ways to Flip Houses
- How a Beginner Can Get Started Immediately for Less than $3.50 Per Day
I am about to reveal the step by step processes involved;
You will discover how to flip houses
…even if you have bad credit and no huge capital typically needed in traditional real estate investments.
Money has always been a by-product of the amount of value you can offer a market place. In flipping houses, it’s no different.
But What is House Flipping?
It is the act of buying houses at a lower price and selling them at higher prices for a profit…
when you look at it from a fundamental standpoint.
Just think about it; houses that we all live in come to the market by way of a seller right?
But sellers also get those houses from somewhere.
The bottom line is that everyone is into house flipping in one shape, form or the other.
But when you deliberately get into the business of specifically looking for houses that you can purchase at a discount
And then turn around and list on the market for sale, you are then considered to be in the business of flipping houses.
Have you ever heard the saying Flippin burgers, it’s kind of similar.
But I know what you’re thinking.
People who flip burgers are employees right?
But look at it this way.
The people who flip burgers are essentially turning raw meat into something that the customer will buy AKA eat.
So within that same context, let’s look at houses.
The idea is to take houses that are not necessarily in good shape and add some value to it.
And then listed back on the market for sale.
The only reason we would do that over and over again is obviously for profit.
And I’m guessing that that’s the primary reason why you’re here to learn how to flip houses for a profit.
But there are many other businesses that you can get into.
Why should you consider flipping houses especially when most businesses fail within the first 5 years; 95% of businesses.
Why House Flipping is One of the 3 Recession Proof Businesses Ever…
Obviously, shelter is one of the basic human needs namely; food, shelter and clothing.
Even in the middle of the worst human crisis you can ever imagine, any market that involves those needs will always rise.
However, I feel because of the 6 psychological needs of human beings besides just products namely;
- Love and connection
… Markets are created and they fluctuate every time.
Essentially, Market goes up and down from time to time and that also varies from sector to sector and real estate is just one of those sectors.
But the good news is real estate as an industry provides one of three basic needs: food clothing and more importantly shelter; roof over our heads.
That market regardless of what happens in the short-term, will always rise.
I’m going to show you how to make that a non-factor in your house flipping business.
Some may argue that restaurant businesses provide food but they also suffer in the midst of Market crisis.
Well restaurant businesses are a secondary form of food provision for the public; I was talking more about raw food as basic human needs.
Going into a restaurant to eat is luxury. When people suffer economically, one of the first things they cut out is luxury.
In real estate, the same thing is applicable..
People may stop buying houses in the midst of a market recession but at the very minimum they have to keep paying their rent; they have to keep a roof over their head.
So you may have to switch strategies from flipping houses to hold for rent.
Either way, real estate is always open for business.
But what if you don’t have thousands of dollars to buy houses?
Flipping Houses with Bad Credit & No Money
But looking at it from that standpoint seems to limit the opportunity to just people who have the capital to buy a house.
Well capital or cash money is just one resource out of at least 4 resources that it takes to operate the business of flipping houses.
Time, energy and skills are also involved in finding the opportunities.
If you can bring one or more of those resources or value to the table, it’s an extremely lucrative business that you can thrive in right from the comfort of your home.
I learned something a long time ago from the book “Rich Dad Poor Dad” by Robert Kiyosaki.
Never say you can’t. Instead, always ask “how can you?, “how can I?”.
Making money flipping houses it’s about being resourceful; it’s not about how much resources you already have.
Where there’s a will, there’s a way.
If you want it bad enough, you can always come up with the resources you need to join the game.
And if you don’t have money, you probably have a little time that you can invest in skills to learn how to find deals.
That’s a luxury that you have that people that already have money or thriving businesses don’t necessarily have; time.
If you find the deals, investors with cash (cash buyers) will show up because obviously they want the opportunities.
Just by doing that, not only will you make some money finding these deals for these people you will also build extremely valuable relationships that will turn to money over time.
keep in mind that money is a byproduct of how much value you bring to the marketplace.
This is not a home that you will live in; this is more of a property or a house that you will lock under a purchase contract for an investor who has the cash or capital.
So as a rule of thumb, never worry about how much money you have.
Instead, look for opportunities to serve other people in the game and you are automatically in business.
Flipping Houses Is Exactly The Same Way; A Problem Solving Business
The business starts with finding deals; investors make their money when they buy into the deals not when they’re about to sell the deals.
So if you can master the skills of finding and identifying deals for investors who do not have enough time to do so, boom!
That’s where the money comes from; service for the investors who have the cash.
The same thing goes for credit.
Credit is only needed for your personal purchases; it has nothing to do with the skills of flipping houses for a living..
Finding & Identifying Deals: The 70% Rule
ON THE PREVIOUS POST, How to Calculate After Repair Value
As I said earlier, the money is made when buying the property.
If you’re looking to make sure it’s a deal after the purchase of the property, it’s already too late.
There’s a saying in real estate which goes “exit before you enter.”
That simply means you need to know if it’s a deal before you actually lock into the situation.
Is the one single most important skill that you can have in the business of flipping houses; learning how to identify the deal.
Real estate is all about location, location, location; I’m sure you’ve heard that before right?
So it starts with the location of the subject property that you’re interested in.
In this software, you have access to over 150 million property records in the United States alone.
When you drive back and forth from work, you see all of those houses everywhere right?
I remember when I first discovered the business of flipping houses back in 2005, I was very excited about the idea.
Basically I was interested in every house I saw while I drove back and forth from my FedEx job at the time.
In fact, I went looking at a few properties that were listed on the regular Market; the MLS.
The moral of the story is that the majority of the houses you encounter will not resort to a deal.
What makes it a deal is your ability to be able to secure a purchasing price that is deeply discounted in order to create profits upfront.
As you can imagine, it’s not ideal to look at all of those tens of millions of houses without having an idea of what type of houses have a high chance of becoming a deal.
Not The Best Use Of Our Time.
Instead of looking at every house, you need to have an idea what types of property owners have high chances of wanting to sell at a deep discount.
Why would someone in their right mind sell you a $100,000 house at the price of $80,000?
It doesn’t make sense right?
But when you encounter a property owner who is facing foreclosure in the very near future, that story can change very quickly.
So instead of going into every house and trying to make discounted offers, we focus on distressed homeowners because it protects time as a resource.
There are a few other types of homeowners that are in distress that you can target to make them quick cash discounted offers such:
- Vacant Properties.
- Tax Delinquency
- Out of State LandLords
… and many more.
Now this is a real business; you need to have a formula for the maximum you are willing to offer for a piece of property.
In the business, we call that the maximum allowable offer.
That’s where the 70% rule comes from.
What that essentially means is that we do not incur a total cost more than 70% of the after repair value (the ARV) of a piece of property.
That is to say, the purchase cost, repair cost, and total cost of acquisition all together cannot be more than 70% of what the property would be worth after repair.
So in order to identify a deal, you need to first figure out what the property is worth after repair; the after repair value.
Once you figure out what the after repair value is, you need to multiply that by 70% and then adjust the product for the estimated cost of repair.
That is your Maximum Allowable Offer.
For example, you find a piece of property on the public list of pre-foreclosures in your local County and you send them a letter.
The owner calls you back wanting to entertain an offer.
You looked up the comparables i.e. other properties that sold within the last 6 months within a 1-mile proximity radius of the subject property.
And the average price adjusted for the square footage of the livable area of the house comes out to $100,000.
During the phone call, the homeowner told you that the property would need about $25,000 worth of work and repairs.
So you multiplied the ARV of $100,000 by 70% and that produced $70,000 right?
You then adjusted the $70,000 for the $25,000 of work and repairs that the property will need to become marketable.
That produced $45,000.
You call the homeowner back to present a $40,000 initial offer and after back and forth negotiations, they agree to accept $45,000.
Why would a homeowner in their right mind accept $45,000 for a property that’s worth $100,000 in a regular Market?
- Remember that the homeowner was facing foreclosure which means they can potentially lose the property to some kind of mortgage bank or lien holder.
- Also remember that the property needs a significant amount of repairs that the owner may not even have disposable money in the bank for.
- They probably need quick money as well.
This is a classic example of a distressed homeowner; the type of people and target market for flipping houses.
So those are two simple factors that I want to summarize for you and have at the back of your mind as part of your skills of identifying and finding deals.
But is this always good in every market or there is a good and perfect timing to get into the business of flipping houses?
When is a Good Time to Flip Houses
Well, the good thing about the real estate market as I said earlier is the fact that it provides a basic need; shelter.
However, the market does fluctuate due to different environmental factors and other human behaviors such as greed and fear.
Hence the ups and downs of the economy and the real estate market itself.
So I understand the question of whether it’s a good or a bad time to buy houses.
In the same token, it makes sense to be concerned if it’s in fact a good time to flip houses or not. So I get it.
But if you remember, flipping houses, if done right, is based on buying low and selling high, which is essentially what creates the profit.
So buying low with respect to what?
You’ve got to buy low with respect to the present market value.
What is the present market value?
Well, that depends on the last 6 months of sales (up to one year in a bullish Market) of properties within 1 mile radius and proximity of the subject property.
So in a little bit of a twisted way, it’s always a good time to flip houses as long as you know how to value a piece of property.
Your worst case scenario is that the market is in a bear Market in which case you would just have to be a little bit more conservative when evaluating the value of a property.
Shelter is always needed as long as human beings are on the face of the Earth.
Maybe another worst case scenario is buying so you can rent to people that are probably too fearful to buy properties in a Market recession… not so bad right?
Flipping Houses as a Side Hustle
You may have found out about flipping houses from the gurus and seminars.
And you probably got sold on the fact that you can do this part time; can you do this part time or as a side Hustle?
In my humble opinion (keep in mind that I’ve been doing this for 15 years), this is not about part time or full-time;
This is about building an empire.
There are going to be days that you will work 16 hours…
And there are going to be days that you only work one or two hours just to keep your eyes on things from a high-level standpoint.
It just all depends.
There’s work involved.
But the work you’re doing in flipping houses and looking for deals like this is work that you benefit from for Lifetime.
For every hour that you spend working on the business of flipping houses, the rewards (if you never quit) is cumulative in nature.
Now, that’s provided you know how to manage money and you don’t get too excited spending on flamboyant things.
But with the activities involved in a house flipping business, not only are you making a lump sum amount of money in the short term,
You’re finding deals that you can hold on to and create passive income from for a long time and in preparation for a healthy retirement.
Over the years, I’ve noticed many people coming to the game, making some good money, buying cars, big houses, jewelries and many vanity driven things.
So no… it’s not a side Hustle.
This is about building an empire from leveraging the lucrative nature of real estate and flipping houses.
The 2 Ways to Flip Houses
Honestly, there are many ways to flip houses… much more than 2 ways but let me introduce you to the first 2 ways.
1. Buy, Fix And Flip
With buy, Fix and Flip, you buy a property that needs some repairs, you fix it up for the very purpose of listing it back for sale.
The goal is to make money as soon as possible.
So for example, you purchase a property at a purchase price of $55,000
You put in $10,000 worth of upgrade
And then you sell it at the sales price of $100,000.
That’s a gross profit of $35,000.
Your initial investment is $55,000 Plus $10,000, that’s a total of $65,000.
So let’s find out what the ROI (return on investment) of that.
$35,000 in profit divided by the initial investment of $65,000 is equal to 53.8% ROI.
There is no 401k, IRA or mutual funds that can give you that kind of return.
However, that is considered capital gain but there are ways that you can mitigate against too much tax exposure.
That will be a topic for another day.
2. Real Estate Wholesaling
Have you ever heard of the idea of flipping houses with no money and even if you have bad credit?
Wholesaling in real estate is one of the best ways to do that.
It doesn’t involve any kind of money towards the purchase of the property since you’re not the end buyer of the property.
You’re not going to be buying the property?
How the hell are you going to be able to flip a property that you’re not going to be buying?
Well that’s not exactly what I mean.
The property will be purchased; it’s just not going to be by you personally.
Wholesaling from a traditional standpoint is a form of trade where you buy at a Deep Discount from a source closer to the main source for the purpose of selling at a discount to a person who plans to retail the product.
I know that’s a long one.
But let me give you an example.
You can go to a grocery store to buy a piece of tomato at $5?
But that tomato had to go through two different traders before it got to the grocery store.
What if you had an opportunity to have access to the farm where these tomatoes were being grown and harvested?
The cost would be a whole lot cheaper than $5 a piece especially considering that you are probably buying in bulk right?
Basically, you’ll be able to purchase the tomatoes in bulk at a lot less price
And you can even still sell at a discount to the people that repackage to sell them to the end consumer.
You can do that over and over again for profit.
That’s what traditional wholesaling is.
“In retail wholesaling, the wholesaler sells a large quantity of goods to a retailer, who repackages and sells it to consumers at a much higher price. Because of the volume of goods sold to the retailer, the wholesaler can charge the retailer a much lower price.”
Essentially, you can do the same thing in real estate with a slight difference.
You are getting it cheaper because of an owner’s distress and your skills to find deals.
Instead of buying the property, you will simply lock it in a purchase contract at a predetermined wholesale 35% or more discounted price.
The purchase price creates an equitable interest in the property; that’s the right to purchase the property at the price set in the sales contract.
Then, you turn around and sell or assign the right to an able and willing end cash buyer who will actually execute on the sales contract.
Then you collect assignment fees from the cash buyer in exchange for the right to execute on the sales contract.
That’s Real Estate Wholesaling.
You simply get paid for finding the deal and locking it up in a purchase contract.
It’s a valuable part of the business because many investors do not have the time to look for deals so you’re bringing that value to them in exchange for an assignment fee.
The highest I have made from one single deal is $82,000.
Basically, I didn’t have to buy the property.
All I had to do was find the deal, identify the deal, pass on the deal and then there was $82,000 wired into my bank account.
It’s essentially a marketing business.
So you don’t need money to find a deal and you do not need a good credit since you’re not going to be the end buyer of the property
But like I said, it’s a marketing business model.
You may need money for marketing, lead generation and training if you don’t know how to generate leads already.
All of that can be as cheap as $100, $200, $300, or $50,000 if you end up at a seminar….
Either way, it’s worth it if you dont quit and run it as a business and not a hubby.
But it is in fact true, that you do not need any money or credit to purchase properties to make money in real estate.
So let’s talk about how to get started.
How a Beginner Can Get Started Immediately for Less than $3.50 Per Day
One of the most popular questions that I get all the time is “where do I start from?”
Well that’s also a very broad question but let me try to do it some justice.
The question is basically a product of not knowing the step by step process that leads to closing the deal.
As I said earlier, this starts with marketing to find and identify deals.
I already covered that a little bit earlier but let’s look at the steps that go into finding and then closing a deal.
Step Number One – Data
To keep it simple, that simply means addresses of potentially distressed property owners.
Traditionally, you would have to go to the county houses to find records of pre-foreclosures, people facing divorce, tax liens, people that owe money and taxes against the city etc.
But in this time and age, you have access to over 100 million pieces of property records…
And any information about any public records that they’re on with respect to distress right from your laptop and a simple internet connection.
Step Number 2 – Contact
We use a process called skip tracing to find the contact information beyond just the physical and mailing addresses of these property owners such as:
- Phone numbers and
- Email addresses.
In this part of the process, you simply want to initiate contact with the potential distressed owner.
Step Number 3 – Leads Generation
The 1st two steps allow you to market to these potential discount property sellers.
When someone decides to respond to your marketing message that simply says “we buy houses”, a lead is generated.
That’s partly a byproduct of your first two steps and partly text message prospecting activities;
These days we prefer to use text messages to reach out to those people because it feels less intrusive than most other marketing channels.
When they show any level of interest in potentially selling to you, a lead is generated.
At that point, you want to simply find out more information about the property, why they are selling and when they need to sell.
The answers to those questions will tell you how motivated they are and help you during negotiations.
You want to simply make it a point to spend your prospecting time with people that are motivated, negotiate and give them your maximum allowable offer.
Being a motivated seller to you means they are desperately more interested in getting rid of the property than selling the property at the highest possible price.
The property has basically represented a form of headache, problems and pain for the seller and you are simply there to help them get rid of it.
You get to make some serious money in that process.
After finding out why and when they need to sell the property, you will end up negotiating until you come up with a price that works for both parties.
Step Number 4 – Contract
After negotiating a price that works for all parties, you want to simply present a contract at a price that was agreed upon and get them to sign it.
Remember, it is the purchase contract that creates the Equitable interest that you are now able to sell or assign to an able and willing cash buyer or investor.
Step Number 5 – Deal Disposition
Last but not least, that is basically where you get to sell and assign Equitable rights in the purchase contract to an end cash buyer or investor.
Well it could also be where we start to work on renovation of the property if what we have chosen to do is to fix and flip the property.
HAVE YOU SEEN THIS: Smart Real Estate Wholesaling (FREE AUDIOBOOK)
Flipping houses is a very lucrative business but that’s only true if you comprehend completely that it is a business that requires marketing skills and activities.
The business is primarily driven by your marketing activities.
The intelligence of your marketing activities is also driven by how good you are at efficient and effective data collection and Analysis.
Time is of the essence.
There’s a lot more competition than it was when I started back in 2005 because frankly people are learning more and more about entrepreneurship.
And one of the easiest ways for regular people to get into entrepreneurship these days is by flipping houses.
But that means more competition so you need to find out how you’re going to stand out in the marketplace with a bunch of people presenting similar offers.
One way to stand out from your competitors is to understand that we live in the technology-driven age.
Always think of Leverage and how you can do things a lot faster with less resources.
When I say “do things”, I mean specifically bringing value to the marketplace.
There’s a place for manual work in the business but there’s no place for manual labor; you get paid for creating results.
You get paid for getting things done and not doing things.
Frequently Asked Questions
Can you really flip houses with no money?
Yes you can flip houses without needing money to purchase the property even if you have a bad credit.
In that case, you will need to invest another form of resources such as time and marketing skills.
What is the 70% rule in house flipping?
The 70% rule is a rule that states you must not incur a total acquisition cost more than 70% of what the property is worth after repair.
The total acquisition cost within this context is the purchase price plus the estimated cost of repair.
How do you flip a house for beginners?
As a beginner, it’s best to start by learning how to find and identify a good deal based on market values.
How much money do you need to flip a house?
You do not need any personal money to buy properties to start flipping houses but marketing training to acquire skills of finding deals and monthly marketing can cost you as low as $300 per month.