5 Tips When Buying Your First Flip
We've finally closed on our first home, purchased solely to flip!! We've done a couple live in flips, but recently began exploring real estate investing and started actively looking to buy another fixer-upper. We won't live in it as we go, it has a serious timeline, and we've got the spreadsheets and contractors to back it alllll up. It's really, truly, a total 100% flip.
We've been on this journey to start running some flips, formally, since early 2018. We've learned a lot along the way and wanted to share some of that for those considering doing a flip of their own! Here's 5 lessons we learned when we got our first deal.
1. Resiliency is Key
Real estate investing, no matter what method, is not for the faint of heart. The great news is that anyone can do this! The hard part is that many, many people will try. If you've decided you're truly ready to take the leap, then the most important thing to do is stay optimistic throughout this process!
For us to purchase one home we spent nearly 100 hours searching for properties and running comps, made very aggressive offers on 3 different properties, bid at auction on another property, paid for 3 home inspections and a title search, and had one home go under contract and fall through a week before closing (due to Lesson #3.)
After all that, we ended up making an offer on a home which got through to the closing table. It's our current flip in progress, which you can check out here. This amount of work to get to the closing table is not uncommon. Often, it can take a lot more than that. So when you've made offer #4 and it still hasn't happened, don't worry. It's all a numbers game, and when you do you get that deal, it will be that much sweeter.
2. Not All Deals are Good Ones
We came across dozens of homes to purchase when trying to find our perfect flip home. Many were advertised as "Investor Opportunity!!" or "Just Needs Some TLC!". Remember that anyone advertising a home is marketing something to you, and while it's a great idea to trust others, you always want to VERIFY. If you feel you've found a great flip opportunity, it's very important to be thorough with what your costs will be to flip. Bigger Pockets has some great calculators to get you started, and you're going to want to call your real estate agent to run some comps for after repair value. Your agent should be able to tell you what renovated properties are selling for in the subdivision of the home you are looking at and whether or not it will be worth what you think it will.
3. Do Your Due Diligence
It's a really good idea to take advantage of your inspection period. Especially when purchasing a flip, you're going to want to know *everything* you'll need to do to get the home turned around for resale once you're done. Whatever YOUR home inspector finds, the buyers who purchase the home when you sell it will most likely hear the same things from THEIR home inspector. It's great to get ahead of any major issues that weren't apparent during your walk through of the home.
Make sure to consider other things like any potential liens or title issues on the property, the neighbors & the curb appeal, and the cost of insurance on the home. This last one was what made us back out of a deal a week before closing. We requested insurance quotes on the property (a foreclosure), at which time we found out the previous owner had filed a fraudulent sinkhole claim on the home which made it permanently un-insurable. A total fluke for sure, but a great example of why it's great to do your due diligence.
4. Think Outside the MLS Box
While there are plenty of distressed homes that make it on to the MLS, we found several of the homes we pursued the most via other methods, including the one we ended up closing on. The tricky part about ONLY searching for homes on the MLS is that plenty of other people are ONLY using this resource too - driving up prices and competition. While it's a great place to start, make sure to think outside the MLS box. Here's just a few other places we personally found distressed homes for sale:
Social Media (& FB Marketplace specifically)
Real Estate Wholesalers
FSBO's in Desirable Neighborhoods
Monthly Investor Meet-Ups
Word of Mouth
Your Real Estate Agent's Network (Pocket Listings)
Tax Delinquent Properties
There's a ton of ideas out there to find homes to flip! Which leads me to my last lesson. It's important to...
5. Build Your Team
The biggest thing we've learned so far is that NO ONE is successful in this industry by themselves! We joined a local investor's guild and have gotten to network with all kinds of professionals that work together to make a ton of deals happen! We've gained a circle of supportive people that have helped us make our goals feel really attainable. We have excellent real estate agents, inspectors, contractors, insurers, wholesalers, etc. in our corner. These people will be our team, and over time, we'll be theirs too. Our friends have started to get involved with us during this adventure, and that's been wildly helpful.
If you're thinking about getting into house flipping, it's also important to find someone who is ultra talented (or at least further along) than you to help guide you and teach you things big and small. The people you choose to be on your team can totally shape your success and the time you spend building those relationships will be the most important investment you make.
Anyways, we hope that this offers some helpful insight into just a few of the many things to consider when beginning a journey into real estate investing. To learn more about our first true flip in progress, you can check it out here!
-Emily and Patrick