Making Massive Profits Flipping Properties Buying Fixing and Selling has received much attention from the media over the last couple of years. HGTV and The Learning Channel both have many shows focused on this exact technique.
[Note ? Than Merril's Flip This House season was the best one of them all] This is a technique, that if executed properly, can make you rich and quick! Yeah I said it, Get Rich Quick! What's wrong with that?
Buying Fixing and Selling also goes by flipping and some people, including myself call it retailing. For these purposes let's abbreviate it BFS. When using the BFS technique you are acquiring a property that needs work, fixing it up and selling it for a profit. Sounds easy right. Well sometimes it is and sometimes it isn't. Last year I did 14 BFS deals. Here's how they worked out:
I lost money on 2. Total loss was about $25,000.
I essentially broke even on 2 others. No money made but no money lost.
I made money on 10 totaling about $150,000 net profit.
I am admitting I lost money on 2, and broke even on 2 to let you know that no matter how smart you think you are [I think I pretty sharp nowadays] or how well you know this business [I have done over 700 deals] you still can't guarantee yourself success on every deal. Real estate investing carries some risk with it and the sooner you realize that, the better. Now let's talk about what you need to know to succeed.
Property Selection ? Selecting the right property to BFS is paramount to your success. Start with the location. You want a property that is located in an area that is primarily occupied with owners NOT tenants! Reread that last sentence if you have never done a BFS deal, it's that important. So now that you have determined an area lends itself to successful retail selling try to pick a home that has mass appeal. In my market that means you want at least 3 bedrooms and no less than 1.5 baths. Each market varies but make sure your property will appeal to the masses in your target demographic. Finally, buy properties that feel good. You know what I mean. Sometimes you walk into a house and you just don't feel good. Maybe the rooms are too small, ceilings too low, bathroom too small or kitchen improperly placed. Don't buy these houses to BFS. Buy houses that feel good! If you are unsure and have know sense of what feels good take your wife. If she is no help, take your mom. Mom always knows.
Running the Numbers ? Have you seen your local wholesaler offering the "best deal of the year" lately and running numbers that looked like this?
After Repair Value - $100,000
Sale Price - $80,000
Repairs - $10,000
Your Profit - $10,000 !!!!!
If so, call the police right now because you have a crook on your hands! Enough said about that. Here is how you should analyze a BFS deal and coincidently, this is exactly how we, at Homes For Investors do it on every one of our deals we wholesale!
After Repair Value
minus all of the following:
Sale Price
Closing Costs
Transfer Tax
Points
Pro Rated Interest
Title Insurance
Closing Fees
Etc Etc Etc
Homeowners Insurance
Repairs Needed
Holding Costs ? length of time varies according to your local market
Mortgage Payments
Property Taxes
Utilities
Etc Et Etc
Sales Costs
Real Estate Agent Commission
Sales Costs Inc Transfer Tax
Equals your:
Projected Net Profit!
And that's it folks! There is no other way to analyze a BFS deal. Use this formula, be realistic with your numbers and more times than not, you will succeed.
The Rehab ? The next lesson is focused on Rehabbing so please, save me from unnecessary typing and wait until the next lesson for this part. Much appreciated.
Property Preparation ? Once your rehab is complete now comes time to prepare your property for showings. At bare minimum you will want to:
Do a thorough walk through checking to make sure everything works.
Perform a thorough cleaning of the property.
Place air fresheners throughout.
Stage the property for maximum showing appeal.
Marketing ? As the final step to BFS successfully I am going to suggest you not take on the task of marketing your property. See, unless you are a licensed real estate agent you are going to miss out on the most proven method of marketing your property, the MLS. The MLS stands for Multiple Listing Service and is used nationwide by real estate agents. Once your property is listed on the MLS it is available to all agents.
While I do not suggest you market your own properties I do suggest a few things you should have your real estate agent do. They are:
Post flattering pictures on the MLS Listing
Post Virtual Tour or Video on MLS Listing
For Sale sign in yard
Directional signs surrounding the neighborhood
Hold several open houses
Have Info Box flyers in front yard
BFS is an awesome way to create quick cash profits. As long as you follow a few simple rules, some of which are discussed here, you should do just fine.
