Real Estate Investing – Flipping Houses E-Book

James Connor

• Herausgeber: J4 Publishing LLC
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2021

Beschreibung

If you want to discover the shortcuts to making huge profits through flipping houses to become financially independent and live your dream life, then keep reading …

Do you know what the quickest and most efficient way to make profits out of real estate investment is?

In 2017, 200,000 homes were bought and sold in the US within a twelve-month period. That’s 6% of all the single-family homes and condos sold during the whole of the year.

Do you know why?

It’s because these houses were flipped.

Imagine buying a house, then quickly renovating it, before selling it four weeks later at a profit

A good house flipper can turn a month of work and investment into a year’s worth of profits, all because they understand the secrets to successful real estate investment, and how to rehab and resell a home.

The average profit margin for a flipped home in 2018 was $29,342.

That’s the average for the whole of the United States.

If you know where the most profitable house flipping locations are, then you can easily reap 6-figure profits.

A skilled house flipper knows more than just where to invest, but also when to invest.

Too many people think that they only need to learn the 70% rule and then they’ll become a house flipping tycoon and be rich in no time.

But a skilled house flipper understands that calculating risk correctly, based on numerous considerations, is the secret to becoming a house flipping success instead of a flipping flop.

These skills can be learned, as long as you have a willingness to put in the time and effort required. Mindset and work ethic go a lot further in real estate investment than fancy degrees or even a huge bank balance.

You just need to start learning, and then you’ll start house flipping in no time.

In this book, “ Real Estate Investing – Flipping Houses”, you will discover:

• The 8 key ways to secure financing
• The most important consideration when choosing the right real estate farm area
• How to choose who to buy from and why
• The 10 places you need to go to locate the very best real estate deals
• The secret formulas for profitable home flipping
• How to become a killer negotiator, who always makes the best deals
• The 7 questions you must ask before hiring a contractor
• The techniques to becoming a ruthless closer
• How to apply for the most beneficial license every house flipper needs to have

And much, much more.

House flipping sounds so easy and so profitable to do, that it’s too good to be true.

It is this kind of thinking that makes people sit on their sofas, thinking about what could be, rather than discovering the proven methods to house flipping, that has turned millions of former nobodies into millionaires.

Even if you’ve never heard of house flipping before, you can invest in real estate and make quick, effective profits. You just need to discover the secrets to a successful house flipping operation.

If you want to discover how to flip homes and reap huge, quick profits, then you need this book today!

Leseprobe

Real Estate Investing – Flipping Houses

Complete Beginner’s Guide on How to Buy, Rehab, and Resell Residential Properties the Right Way for Profit. Achieve Financial Freedom with This Proven Method

––––––––

James Connor

© Copyright 2019 - All rights reserved.

The content contained within this book may not be reproduced, duplicated or transmitted without direct written permission from the author or the publisher.

Under no circumstances will any blame or legal responsibility be held against the publisher, or author, for any damages, reparation, or monetary loss due to the information contained within this book. Either directly or indirectly.

Legal Notice:

This book is copyright protected. This book is only for personal use. You cannot amend, distribute, sell, use, quote or paraphrase any part, or the content within this book, without the consent of the author or publisher.

Disclaimer Notice:

Please note the information contained within this document is for educational and entertainment purposes only. All effort has been executed to present accurate, up to date, and reliable, complete information. No warranties of any kind are declared or implied. Readers acknowledge that the author is not engaging in the rendering of legal, financial, medical or professional advice. The content within this book has been derived from various sources. Please consult a licensed professional before attempting any techniques outlined in this book.

By reading this document, the reader agrees that under no circumstances is the author responsible for any losses, direct or indirect, which are incurred as a result of the use of information contained within this document, including, but not limited to, — errors, omissions, or inaccuracies.

Table of Contents

Table of Contents

Introduction

Chapter 1: Basic Concepts

House Flipping:  What is it?

Wholesale Flipping

Rehabbing

How Does House Flipping Work?

How Much Can You Make Flipping?

Taxes You Need to Pay as A Home Flipper

Ordinary Income Tax Implications When Flipping Properties

When is Capital Gains Tax Applicable to House Flipping?

Does Flipping Still Work in Today’s Market?

Chapter 2: The Renovating/Rehab Process

Appraise the Investment Property

Make a Checklist

Create a Budget

Locate The Appropriate Contractor

Get the Needed Permits

Rehabbing the Property

Begin the Cleanup Phase

Begin with Enhancements to The Interior

Enhance the Exterior

Finalizing Stage

Chapter 3: Get Your Financing in Place

Getting Financing

Things to Put in Place Before You Apply for A House Flipping Loan

Develop a Business Plan for Every Flip

Get Accurate Estimates of All Costs of Renovation

Develop Your Network

Ways to Get Financing

Bank Financing

Personal Loans

Line of Credit

Hard Money Loan

Loan from Family and Friends

Look for a Financing Partner

Real Estate Crowdfunding Sites

401(k) Financing

Your Financial Inventory

Credit Score/Credit History

Your Earnings

Your Resources

Debt

Familiarity with Investing

Chapter 4: Locate Your Agent(s)

Is Your Housing Market Suitable for Flipping Houses?

An Agent Can Locate the Appropriate House for You

An Agent Offers You Market-Driving Tips When Remodeling

An Agent Offers You Advise On When-to-Sell

What Kind of Agent Should You Choose?

Dual Agents

How to Choose a House Flipping Agent

Experience

Has Time for You

Devoted to their Job

Inspired by Relationships

Capable of Learning

How to Get Your Real Estate License

What Can You Use a Real Estate License for?

Is it Compulsory to get a Real Estate License to Flip Homes?

Benefits of Having Your Real Estate License as A Rehabber

Chapter 5: Where You Should Buy?

How to Choose the Right Real Estate Farm Area

Choose a Farm Area Close to Home

Investigate Your Farm Area

Pick a Farm Area with Clear Boundaries

Ensure Your Farming Area Is the Appropriate Size

Check your Farm Area’s Numbers

Piecing It All Together

How to Develop Authority in Your Farm Area for Real Estate

Direct Mail

Knocking on Doors

Door Hangers

Facebook Advertising

Take Part in Online Local Forums

Meetup Groups and Local Events

Get Your Website Ranked on Google Using Local Search Terms

Chapter 6: Who Should You Buy From?

Buying from Owners with Equity

Buying from Absentee Owners with Equity

Buying from Owners Without Equity

Buying Foreclosures at Auction

Buying (REO) Bank-Owned Foreclosures

Choosing the Best Option for You

Chapter 7: How to Locate the Best Deals

Use the MLS

Become a Part of a Real Estate Investment Group

Search for Auctions

Talk to Wholesalers

Use Classifieds

Find an Agent

Use a Short Sale

Use REO

Seller Direct

Take a Drive Around

Check The Internet for Listings

Chapter 8: What is the Financial Formula for Flipping Homes?

ARV or After Repair Value Formula

70% Rule Formula

Maximum Buying Price

Expected Return on Investment

The Formula for Offer Price

Chapter 9: How to Make Offers

Crafting a Good Offer

Run a Comparative Market Analysis (CMA)

Consider Market Indicators

Determine The Motivation of the Seller

Learn About Other Offers on the Home

Get a Pre-Approval Letter if it Is a Financed Deal

Make A Larger Down Payment

Get an Attorney to Analyze the Offer

Engaging in Negotiations

Open negotiations

Start your bid low

Stay Calm

Play Hard to Get

Reach Out to Sellers Directly

Sealed Bids

Holding Deposits

Seller Counteroffers and Responses

Agreeing to The Terms

Rejecting/Refusing The Terms

Make a Counteroffer

Chapter 10:  Doing Your Due Diligence

The Legal Due Diligence

Due Diligence Tasks

Do Your Homework

Go Through the Title History

Take a Look at Homeowners Association Restrictions and Covenants

Inspect The Property

Preparing for The Inspection of a Property

What a Home Inspection May Not Entail

General Home Inspection

(WDO) Wood-Destroying Organisms Inspection

Lead-Based Paint Inspection

Radon Gas Inspection

Run Your Numbers Once More

Steps to Take if the Numbers Are Not Right

Request for a Reduction in Price

Walk Away from The Deal

Chapter 11: Hiring Contractors

What Type of Contractor Do You Need?

Finding the Right Contractor for Your Project

Places to Find Your Contractor

Referrals from Real Estate Investment Clubs (REIC)

Ask Subcontractors

Check Out Your Farm Area

Check Hardware Stores

Check Online

Questions to Ask Before You Hire a Contractor

Have You Worked for Someone Similar?

How Long Have You Been in This Job?

Do You Work Alone?

Is There Any Area You Don’t Work On?

Are You Presently Working On Any Project?

Do You Have the Required License?

Do You Have Insurance?

Signs to Look Out for When Choosing a Contractor

Get Numerous Bids

Analyze the Job

What to Do About an Unreliable Contractor

Understand Your Options of Payment

Draw Up a Written Contract

After Hiring a Contractor

Keep detailed records

Release Payments Wisely

Be Aware of the Limit for the Final Bill

Know When You Can Deny Payment

Take Advantage of a Sign-Off Checklist

Chapter 12: Managing Your Rehab

Make a detailed plan

Don’t Assume

Prepare the Scope of Work

Make Sure You Are All in Agreement

Dealing with Service Providers

Do Not Alter Your Decisions

Have a Contingency in Place

Don’t Pay Contractors for Work Before Completion

Ensure You Are Physically Present

Know Your Suppliers

Hire an Expert

Chapter 13: Agent Versus FSBO

Is it Compulsory to Hire Real Estate Agents?

FSBO or For Sale by Owner: What Does it Mean?

Agent vs. FSBO: Fees

Marketing

Time

Negotiation

Legal Assistance

Which Is the Ideal Option For You?

Chapter 14: Staging

Staging A Home: What Does it Mean?

Does Staging Work?

Use Neutral Colors

Clean and Clean Some More

Keep Things Fresh

Let There Be Light

First Stage the Vital Rooms

Rent Some Furniture

Don’t Ignore the Curb

Chapter 15: The Closing Process

What Is a Closing?

House Closing Process for Sellers

Negotiating

Closing Costs

Agent Percentage

Buyer’s Due Diligence

Closing

When Is Your Property Categorized as Sold?

Conclusion

Bibliography

Introduction

At some point, you have probably heard people talk about real estate investment. For many people, it is an easy way to make money, especially when it comes to flipping houses. Maybe your interest was triggered by shows about flipping you saw on television, or you have a close friend who is earning a lot of cash from real estate. Now, you are interested in going into the business, but you don't know where to begin.

The fact is, lots of other people have been in the same place you are right now. Even worse, many of them were unable to attain success when they finally gave it a try, while some were able to hit the right buttons and become successful in real estate. So what was the difference? Why were a few of them successful, and others were flops? How can you be among those successful individuals?

Here’s the thing: you are already on the right path. By buying this book, you have taken a significant first step. In this book, you will learn all you need to know about investing in real estate and rehabbing homes. You will also learn how to find the best home to flip and how to get the financing you need.

With this book, you will develop the knowledge you need to buy, rehab, and sell properties for profit. We will look into these topics and a host of others related to real estate investment. I do not promise that there won't be obstacles on the way. However, I am confident that when you are through with this book, you will have a comprehensive understanding of all you need to know to become a prosperous rehabber. Also, if you effectively use all the information offered by this book, you will be able to sell your first home and many more for continued profits.

Now, let’s begin this journey to becoming a successful real estate investor.

Chapter 1: Basic Concepts

House Flipping:  What is it?

House flipping is when an individual makes the choice of buying a property to fix it up and quickly resell it. The individual buys the property and raises the value by renovating it before selling it for profit within a few months.

There are two major kinds of real estate investment you will be coming across as an investor in real estate, which we will discuss below:

Wholesale Flipping 

Wholesaling has to do with buying a property and reselling it to another investor immediately, for a profit. This mostly takes place the same day or at the same closing table. Here, you rarely have to do any form of repairs on the property before selling it to some other investor. 

As a wholesaler, you are only reselling the same property you purchased, but for a profit. If you want to be successful as a wholesaler, you must be excellent at negotiating and should be able to persuade sellers to let go of properties at a price lower than the market value, while still convincing buyers to buy at higher than the market value. As a wholesaler, you sell homes for a profit in only a few days, which means you get faster paydays and the possibility to engage in more deals than those involved in other forms of investment.

Although wholesaling is fast, there are a few downsides to it. First, you need to have investors on hand who are willing to buy your property. When it comes to wholesaling, the absence of a ready buyer means no deal. Also, based on how you drew your contract and the amount you placed in escrow, you might need to pay back your seller if you have problems finding a buyer.  It is ideal to have prospective buyers ready before you make the seller an offer. This way, you have a lower risk of losing cash. Sometimes, the money you lose might substantial, but the primary damage would be to your reputation. If the news reaches others that you have a negative impact on homeowners, others may not be interested in collaborating with you. If you feel wholesaling is not ideal for you, there is a more common type of real estate investment, known as rehabbing.

Rehabbing

Rehabbing is when an investor buys a property, renovates it and upgrades it before selling it for a higher price. These projects have a life span of four or more weeks, depending on the level of work that needs to be completed during the renovation. The process is also known as “fix and flip,” and it is one of the most popular methods of investing in real estate today, and not without good reason. Rehab properties can provide investors with a considerable profit margin while also aiding them to expand their network and portfolio.

Property owners who renovate their homes to increase the value of the property or for personal use, also fall under the category of rehabbing. This is the case even if they have no plans to sell off the property.

There are a host of other methods to flip homes beyond rehabbing and wholesaling; however, these are the most popular. In comparison to wholesaling, there are a lot of more options open to a rehabber, that will provide a broader opportunity to get returns. With this in mind, the rest of this book will pay more attention to the rehab aspect of flipping homes.

How Does House Flipping Work?

To flip a property the right way involves a reasonable amount of work. You need to follow a few steps which will be discussed below:

●  Find: Search for properties that will make fantastic deals. Here, you are on the lookout for people who have an interest in selling their homes. There is a range of reasons individuals want to sell their homes. For a few of them, selling the house can help them fix a pending challenge, while for others, the home may be a problem they want to get rid of. Your objective should be to find these people and help them solve their problems. However, you need to have a budget and be aware of the highest amount you can invest in buying a property.

●  Search for Financing: Next, you will need to look for a way to finance your house flip. With this, you will be on the lookout for lenders who can provide you with funding based on the value of the property. If you have the capacity, you can invest your own funds.

●  Renovate or Fix: The next step in the process is to renovate or repair the home. This is the step that separates those who are successful from those who fail. To properly do the job, you need to pay attention to contractors, monitor the cost of repair, and remain within your timeframe and budget to develop homes people will want to buy. You also need to have a knowledge of negotiation with contractors and how to pay them the right amount to ensure they will do the job right.

●  Flip: If the process is followed correctly, you will have a completed property at a reasonable price. This is the period you advertise your home for sale and learn ways to sell to make sure you get a good profit on your investment.

How Much Can You Make Flipping?

You can earn a lot from flipping homes, especially if you invest these returns into flipping more properties. The more places you flip, the more your profits will keep rising. If you check out what flippers earn per flip, you will see that house flippers are not just talking, they are making a tremendous amount of cash.

In the United States, the aggregate profit margin for flipped homes is  $29,342 ("The Average Gross Margin in a House Flip", 2018). Although this is a pretty decent profit, you will be able to make more profit if the properties you are flipping sell in the range of $100,000 or more. These properties come with a 54 percent ROI, which makes it the most lucrative price range for house flipping.

The amount of money you can make from flipping a property is also dependent on where you are located. In 2013, flippers in Massachusetts made a gross profit of $103,384 on each home on an average, while flippers in California pulled in $99,999 for each property in 2013. New York, New Jersey, Maryland, and Washington are also states that have helped flippers make lots of profit ("6 Best States to Flip a House in USA – Oracle Fields", 2018). If you can flip a home in one of these states, then you will be able to make some serious cash on each flip.

Even though there are average earnings, you have the potential to make more of this or way less, depending on your skills. You need to understand the rate of success and failure before you head into this business. However, even though you stand to make a lot from flipping homes, you need to make accommodations for taxes, which may take a sizeable part of your earnings.

Taxes You Need to Pay as A Home Flipper

For many people, this might be the sad part of flipping. However, you will need to pay taxes on whatever profits you make. If you have been categorized as a dealer by the IRS, the revenue from your flipped property would be taxed using your ordinary income tax rate. 

To calculate your profit, you need to subtract all your costs, which include the price of the purchase, from your final sales price. For active investors who earn active profits, the tax bracket falls within 10 to 37 percent (Ivy, 2019).

The IRS states that a dealer in real estate buys a property and sells it to clients in the typical course of their business or trade. Lots of rehabbers are categorized as dealers because they hold on to properties for a short time, and most of their earnings come from flipping properties. Even part-time house flippers may be classified as dealers and would be taxed using ordinary income rates.

In contrast, returns you make from properties you hold for over 12 months are privy to a more beneficial long-term capital gain range of around 0 – 20 percent. An investor can make the choice of occupying the property or renting it out (Ivy, 2019).

Ordinary Income Tax Implications When Flipping Properties

If you are categorized as a dealer, the returns from a flip will be taxed using your dominant ordinary income rate. The range of ordinary income tax rates falls between 10 and 37 percent. Also, the profit is liable to self-employment tax of around 15.3 percent, which is twice the amount you will pay as a W2 employee.

As a dealer, the tax implication on each flip could range from as high as 53.3% to as little as 25.3%, based on your tax bracket. What this means is, you have to bear in mind that all of your profits do not come to you, but rather, a vast part belongs to the IRS (Ivy, 2019).

When is Capital Gains Tax Applicable to House Flipping?

If you are lucky enough not to fall in the dealer category, and you get most of your revenue from purchasing and selling properties after a year, then your taxes will be at the lower capital gains rates on the returns you get from the sale.

If you are serious about going into the business of flipping houses, either as a part-timer or full-timer, then you need to reach out to a professional CPA or accountant who can aid you in structuring your business in a way that would ensure your taxes fall in the lowest bracket possible.

Does Flipping Still Work in Today’s Market?

In the past, flipping houses was an ideal chance for an individual with extra funds and an excellent eye for renovation to make money. The market was filled with unoccupied homes from waves of foreclosures caused by the housing crash that blew up some years before. You could purchase a property from a bank, do the needed repairs, put on a coat of fresh paint, and list it for a higher price on the market.

However, with the real estate market heading back to the level it was before the recession, the amount of properties being listed on the market every month is not as high. A day after listing a property, bidding wars begin, which results in homes being sold way beyond the asking price in many circumstances. Buyers who are ready to reside in the homes they buy are finding it difficult to find cheap properties, which implies it is even more difficult for investors in search of homes at low prices. 

With these factors in mind, the question many investors tend to ask is: “Does flipping still work in today's market?”

The answer to this question is yes. Flipping is starting to become a recognized business, as an increasing number of organizations like Offerpad, Opendoor and Zillow are providing fast purchases of homes in cash with the aim of fixing and selling for returns. These organizations give more choices to property sellers, but their existence brings about a more competitive market for other investors.

Still, this does not prevent individuals from making an effort to flip properties. However, the requirements for investors who want to attain success are starting to change. In addition to having the capacity to locate the appropriate house and a homeowner who has an interest in selling, you also need the financial ability to get past the stages of renovation and marketing before you can see your returns.

To enhance your possibilities of earning cash from flipping properties, here are a few more steps you can take:

●  Invest differently: Instead of searching for homes on numerous listing services, try locating those that have not been listed on the market but whose owners are likely to have an interest in a sales offer. You can effectively do this by going through the data of the property and deciding which ones will make a worthwhile investment. Also, accessing property records (which you can get at the office of the local assessor) can offer you information on property taxes and how long the same individual has owned a property. You can also try to buy a property and hold on to it in order to get income from rent. However, all of the management and maintenance tasks associated with that property will fall squarely on you.

●  Begin small: If you want to go into the business of flipping homes, don’t start with a property with lots of plumbing issues and a flawed foundation. You have a better chance of turning in profit with a property that does not require too much work, but that can be sold off at an increased price with a few small repairs and competent staging. It will also be less challenging to lure lenders when there is not as much risk involved, particularly if you are going into real estate for the first time.