Fix it and Flip it Strategy
As a continuation to my Flipping Houses? post, I wanted to share an article that I think warrants review. Dan Auito, author of "Complete Home Rehab in 10 Days," says that in order to succeed in Fix & Flips, "You must be somewhat of an appraiser and deal finder." For most of us in real estate, it takes time to recruit a team of professionals. If you are like me, you feel you are putting your reputation on the line as well as theirs and you want professionals who will respect you and your clients. You don't have to be a part of a BNI group, all you need to do is start networking and talking to professional tradesmen. Attend your Chamber of Commerce meetings, builders associations or investment group meetings. Another post I wrote on Building Relationships talks about setting up a referral network on your own, you can use ours as an example.
One way to avoid potential "money pits" according to Auito, is to be sure that three areas of the house are in excellent repair; electrical, plumbing and HVAC (heating, ventialing and air conditioning) systems. "These systems are expensive to correct in relation to the value they return to you upon resale," Auito says.
As I mentioned in my last post on Flipping Houses?, other areas to pay close attention to are; roofing, foundation and structural integrity. Unless you have a private backer with deep pockets, you want to stay away from homes with these types of problems. This area can cause your return on investment to diminish due to the costs to provide these repairs. The end does not justify the means.
Most of you already know your focus is to try to find homes with simple "cosmetic" problems (albeit, this is the most difficult to find). Then with your team of professionals, use the following procedure by Dan Auito to turn over your real estate investment in a short period of time.
"Ten days are up," Auito says, "and this home is either held out for rent, lease-optioned or sold for a whole heck of a lot more than the ten grand that was put into it, if that much."
Again, I would hold onto your real estate investment and first lease to own (only about 22% of lessee's will continue with the purchase) or rent with a one year minimum and a two month deposit (first and last). By renting you are building your networth which you can them borrow against.
I hope you find this valuable and worth your reading! Best of wishes to your success!
David L. Britt, MBA
Olathe, Kansas
David L. Britt Real Estate
Heritage Real Estate
The Heritage Real Estate Team
Olathe Neighbors 
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Olathe, KS based Kansas City Real Estate Consultant specializing in New Homes, Rural areas, Land, and Investment Property. Providing advice and assistance in your real estate needs. Guiding you Home!
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Great Post David...I should know...I'm the "Fix and Flip" lady here in Colorado Springs. Don't we just wish it took a half hour and nobody charged for labor like on those TV shows? We'd really be rolling in the dough, then!
Flip On!
Lania DeMers/Broker, Owner of Rocky Mountain Realty Company
Hey why not buy it fix it up and flip it?
Patricia Aulson/Lic NH/ME/MA
Lania, I'm glad to meet you! TV is just lights and glitter, much like Vegas! So how is your business now? Are you flipping or holding? Any good buys in Colorado Springs, I love that area!! Thanks for commenting! Hope to hear from you again.
Patricia, you can, but there are many who would rather buy now at these low rates and hold onto them and rent. Flipping can still be done, especially if you just need some capital to build upon. But in the long run, I think holding is more profitable. Anyone else want to provide any input? Thanks for asking!
"Flipping" has been popular in Hawaii in the last few years where investors enjoyed such hefty returns. As the market normalizes or transitions into a different phase, we shall see a different kind of buyer.
Thanks for the tip on timing and priority.
Ronda Ching Day
Ronda Sells Honolulu Oahu Hawaii Real Estate
Ronda, I always thought the price of homes in Hawaii would be too expensive to flip! I guess it's all in the market timing and niche! Thanks for sharing!
David thanks for this post -- Unfortunately in Texas you cannot offer a property as "lease to own" unless you own the property outright. So, there goes the investing in homes with very little down and out of pocket.
I do agree with the fix and hold and then sell though. I am in the process of buying homes in the 30-40k putting a paying tenant in there and then selling them for a 10-15k profit to investors looking for rent returns.
I love these posts, so keep it up!
Nick
Nick, can you form an investment group and purchase homes by the group or as a corporation and then lease them? Just a thought. Sounds like you are getting started anyway, best wishes to your success! Thanks for sharing!
David -- I honestly don't know. I am sure that it can be purchased this way and leased but I am not sure that it can be lease optioned. I will look into it though.
I just got back from a foreclosure class and the instructor got me really interested in learning about tax liens and deeds and buying those as a long term investment. Have you done this type of investment?
Nick, I have not done these, but I too attended a training by Robert Allen on tax liens and deeds and it does look promising, nice profits as well! What's your next step? Who was your instructor on the foreclosure class, would you recommend them?
George Roddy Jr. http://www.roddyseminars.com/ was my instructor and he was very good. I am going to take George's class June 28 on buying these liens/deeds to see what kind of risk (if any) there is to this kind of investment. It sounds like it is more a long term investment but if you can get 3 of these for around 30k and make your money back plus 25% interest. So from my little knowledge in this topic it sounds like if you buy em' right then the mortgage companies will come in to protect their interest on the house and buy you out -- so say you bought the deed for 10,000, the mortgage company will pay you 10,000 plus 25% right off the bat.
If anyone else knows more about this please chime in.
Nick, I will check George out and see where he goes. Maybe I can get a chance to hear him. Thanks for sharing this!
Hi David: Thank you for a very informative post. I am a closet 'flipper'. I don't get to do it too often, but love it when I do.
David,
Thanks for the excellent article on flipping. I'll be sure to refer to it when I do my first one.
I would add one more thing to the flip preparations, and that is to have the house staged.
Good luck on all your future flips!
Wendy Casey, CSP
Wendy, Of course!!! Staging is critical to a quick and profitable sale! Thanks for sharing!
I've seen some flip jobs where the home wasn't staged and (at least I do this) I automatically start looking for flaws in the home. Now in a home that is staged perfectly then I get this warm feeling about the home. So I would say staging is a very critical final stage of the flip.
Nick, are you selling or do you flip homes? I agree with you that staging is critical. Thanks for sharing!
David, I do both. Right now it is tough to find homes that can be rehabbed and flipped in less than 6 months. Too many "investors" out there are overpaying for these homes. So this is when I will start stocking up on rental properties with a little bit of equity in them and then sell them off when the time is right.
Nick, yes the same is true here in Johnson county. Too many late night infomercials giving how to buy with no money down and lots of people investigating and buying. I too think rental is the way to go. Thanks for commenting!
David I have to be honest and say that I think the content of this blog is almost as bad as the 'late night infomercials' that make no money down investing look so deceptively easy.
Flipping a house in 10 days is impossible for most except the most expert of 'flippers' with THEIR OWN 'in-house' team of workers for everything. Also, this modal requires everything to be off the shelf Lowe's or Home Depot (wouldn't fly in my price point) If you're putting custom anything in, it takes a lot more time.
The likelihood of scheduling the cabinet installers enough in advance to coordinate with with the countertop installers so that they actually go in on days 7 & 8; YEAH RIGHT. Where do you order the carpet from, and how long did that take to get in?
If you are commissioning a demo guy, a paint guy, a tile guy, a carpet guy cabinet guy etc... It'll never happen in a month of Sundays.
The only way to actually make money on a flip for your average flipper is to do the work yourself. Try doing all the above yourself in 10 days without killing yourself.
A very unrealistic portrayal! IMHO as with all worthwhile real estate transactions, you make your money on the buy side.
Jessica, I may not have been very clear in my comments, I don't think flipping a house in 10 days is reasonable for investors. However, I do believe it can be done in 30-45 days if you have a plan and work the plan. It also depends upon the degree of the work that needs to be completed. Some flips will need minor upgrades, others more major. However, you should know your numbers (number of days and what it will cost roughly) in order to know your decision point. I personally feel that flipping houses in this market is not the best choice. As I stated in my post, I think this is a good market to buy, renovate and rent. When the market changes and you have equity built, then consider selling. Just my two cents! Thanks for commenting, it provides us opportunity for discussion and learning.
Jessica --
You also need to take into consideration what types of homes your are rehabbing. If you are flipping a 100,000 house then yes this can be done in 10 days. Custom cabinets will not be needed in this type of home, most of these buyers prefer carpet (I don't know why but we have a great wood flooring guy but we've notice these types of buyers don't like wood floors). I have a investor client that has many homes ready to go in 10 days.
So Yes You Can Flip A Home In 10 Days, But With The Market The Way It Is The Thing To Do Is Hold And Just Collect Rent.
Nick, I totally agree with your comments!
I am in negotiations right now on a property that will make a great flip if I can get the bank to meet my price. I will keep everyone updated!
Oh this was a fun post to read! I could feel my heart pumping getting all the contractors lined up, scheduled, performing, and manage to make it happen in such a streamlined fashion. Sure, as Jessica mentioned some things can go awry, but many things can go right or be fixed expeditiously when you work at them. I love the prospect of doing this. Can't wait to hear more about your latest venture, or is it adventure?
Nick, I hope all works out well for you and looking forward to hearing your results!
Patricia, I think every opportunity like this is an adventure!! One well worth the opportunity! Thanks for commenting!
flipping a house in 10 days is not a big deal at all, I have a client that regularly does total rehabs including landscaping, replacement of A/C, roofs, tearing down walls and of course the carpet/ paint thing.
Scott, thanks for the support. I trust your client treats you well! Thanks for the comments!