Beginner's Cheat Sheet to Flipping Homes: 10 Steps To Flipping Your First Home
Flipping homes can be confusing when you are just starting out. Especially if you are new to the real estate industry. For you newcomers, here are some quick start steps:
1. Prepare yourself mentally. Determine your motivation for wanting to flip homes. Ideally, it should be emotional. For example, "I want to provide for my mom's retirement". This may seem silly, but your strong motivation is what will get you through the rough patches and will help you overcome your fears. Always remember your motivation during times of doubt or stress. Sharpen your mental attitude and energy. Believe that you can be successful flipping homes. Have faith that if someone else can do it, you can too. Another seemingly silly step, but if you don't have this, you will give up when fear raises its ugly head, or when there is real work to be done. You have to believe you can be successful at flipping homes.
2. Begin your education. But, don't go crazy. Read books focusing on the particular area of flipping you want to focus on. Read articles. The internet is a Catch22. It has an amazing wealth of information, but there is so much; you'll need to be careful not to get overwhelmed. Read enough so that you are familiar with the process, but realize there are experts that will help you along the way. You don't need to be the expert, at least not yet. That will come with experience. Just understand and accept that you will need to start before you are 100% comfortable. (This is tough for type-A personalities.)
3. Determine your investing niche. Decide which section of the home flipping market you want to begin with. Pre-foreclosures, bank-owned, HUD? Determine how much money you would need for each type, compared to what you have available or can get. Focus all of your energies on that one type of property. You can branch out later.
4. Find a real estate agent to represent you as buyer. Select one that focuses on the types of properties you want to flip. Speak with several. You will want one that not only understands the needs of investors, but one whose personality that meshes with yours. Be sure they understand your goals. You'll likely be asking them to make offers that traditional agents may be comfortable with (creative financing, etc.), so this is why you want someone who invests themselves or who routinely works with investors.
5. Get your financial ducks in a row. Check your credit. Do what you can to improve it. Determine the capital you have to invest. Determine potential partners. Determine your funding source. Research potential lenders. Don't forget Hard Money Lenders. Get pre-qualified from three of these lenders. These steps are biggies, but don't let them overwhelm you. Take them one at a time and remember your motivation. Don't forget to set goals.
6. Join a local Real Estate Investors Club. Attend meetings. Being around like-minded people will keep you motivated, not to mention networking opportunities.
7. Attend seminars. These could be real estate seminars, or self-help seminars. They will both build your confidence. Unless you have lots of money to spend on products that are thousands of dollars, go with the intention of being around like-minded people, and learning big picture ideas. Big picture ideas include, "Hmmm, I think I will invest in apartment buildings and I have an idea of where I should start". Or, "I want to get an idea on how to protect future assets". Going with the sole intent of benefiting from general knowledge will keep you from spending far too much money and will keep you from getting depressed at not being able to afford these sure thing products.
8. Find your property/ies. Yes, do your due diligence. That means, research area comparables. Visit the property. Have an inspection completed. Determine how much money you'll need to invest in the property to flip it quickly. Understand the local market so you have a realistic turnaround time. Decide if the property is a good candidate or not. 9. Make an offer by contacting the owner directly when appropriate (pre-foreclosures), the bank or real estate broker. Be prepared with a pre-qual letter and earnest money. This could be a very nominal amount. Do not forget your addendums to the offer that will protect you!!! Negotiate as necessary. Make as many offers as necessary. Remember, it's a numbers game. Expect many offers to get rejected, that just means it wasn't the right deal for. Know that the right deal for you will be accepted. Be patient.
10. Close on your property, rehab and flip. Start out flipping one property at a time. With more experience, you'll be ready to handle multiple properties.
To your success flipping homes!
About the Author
by Brenda Friedl, the founder of Flip Houses for Millions, is a teacher turned real estate investor and millionaire. Her goal, as a former teacher, is to empower others to build wealth so they too, can follow their dreams. Visit www.fliphousesformillions.com for free resources on how to find, buy and flip your way to millions. http://www.fliphousesformillions.com
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Mortgage Refinancing
Financial decisions such as a mortgage refinancing loan can be one of the most important decisions to make in anyones life. Intelligent financial decisions go far beyond the issues of everyday savings or other investments. Sometimes you can be faced with a tough decision in order to better your financial situation. A mortgage refinance is one such aspect of your personal finance that can breathe some life into your stagnant financial situation. Mortgage refinancing consist of paying off your previous debts with the new loan amount. You can enjoy a number of benefits from mortgage refinancing.
The biggest advantage of home refinance is that it comes with a considerably lower interest rate. Most homeowners often have to carry a heavy mortgage payment every month, so homeowners are always on the lookout for ways they can reduce their monthly mortgage payment. One of the ways of accomplishing this is through home refinancing at a lower interest rate, which will give you a lower mortgage payment.
Mortgage loans like this come with two types of interest rates, either fixed rate or adjustable rate. Refinancing your mortgage can also allow you to switch from a fixed rate to an adjustable mortgage rate. Mortgages with adjustable rates are in you best interest when the rates are low, however fixed rates mortgage loans is the wiser option when rates are higher. You should also keep an eye on when mortgage rates are starting to fall. This would also be a good time to change the mortgage from a fixed rate to an adjustable rate. In most situations owning full equity of your house generally requires a period of at least thirty years to pay off the mortgage loan. Refinancing your home will allow you to cut this mortgage period down allowing you to be able to own full home equity in about half the time that it would have taken. This will save you several thousands of dollars on your interest payments and help you to build up home equity faster.
The other nice benefit to mortgage refinancing is that it will provide you with a large amount of extra cash. The home equity you have built over the years entitles you to this extra cash from refinancing. You may use this extra cash for many purposes, ranging from home improvements to debt consolidation. It's up to you!
www.centurymortgages.org
About the Author
Troy Francis is owner and author for Century Mortgages. Please, feel free to use any of our articles. We only ask that you kindly leave our link active. www.centurymortgages.org
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Don't Let Fear Stop You From Flipping Homes for Profit
How many times have you let fear stop you from doing what you wanted to do? We all think we're beyond that. However, the truth is, fear stops everyone at some point in their lives. Think back to a specific incident in your life where you were so intimated by the "what ifs" that you completely talked yourself out of your idea. Have you ever convinced yourself that obstacles were insurmountable and there was no point in proceeding?
This happened to me when I first decided to flip homes. My goal was to quit my job and flip homes full time. I had strong desire, will and motivation; and was willing to work night and day if I had to. I started by doing what most people do. I educated myself on how to flip homes for profit by reading everything I could. Luckily, I like to read, so I read tons of articles. I surfed tons of websites including the real estate investing clubs. Then, I read books. Books on how to flip homes, how to find foreclosures, how to ..... You name it. My next step was to attend seminars.
I knew I was getting down to the wire and it was time to start taking action. I had read that the most difficult part of the process was to find an appropriate property; however, this was easier than I thought. I found several properties that were within a few miles of my own neighborhood (which is what I should do, according to my research.).
And that's exactly where I got stuck...... I was afraid to move to the next step of actually making an offer. All I could think of were the "what ifs". "What if they don't accept my offer? What if they think I'm an amateur and won't want to deal with me? What if I can't get a loan? What if they want more money down? What if I do something wrong to blow the deal? What if I do end up with the property and then it doesn't sell?"
I really outdid myself and paralyzed myself with doubts, and yes, fear. I almost gave up at this point. Luckily, although it took a little while, I finally dug myself out of my well of fear. I called up a friend who routinely invests in HUD properties and picked his brain. I needed to hear that it actually could be done. Then, I called another friend. I told him about this property I had a lead on and asked if he was willing to partner with me on the deal. (I had no money and no credit.) He would get the financing and I would do the legwork. We determined a profit split and..... believe it or not, everything worked out just as planned! We closed the deal a month later and I was on my road to flipping homes full-time. The next one I did on my own and the next. Six months later, I was able to quit my regular job and focus full-time on flipping homes.
Looking back, I wonder what would have happened to me if I would have let fear stop me and I had just given up. I would probably still be at my old job. Which, I liked, but didn't provide me with the financial freedom I wanted. I would have always wondered, what if? Boy, am I glad I don't have to wonder.
Although it was a personal challenge, I moved past my fears. You can too. The key is DON'T GIVE UP. Don't listen to that ugly, doubtful, inner voice. Let your positive voice speak louder. Ask yourself, "What if I make tons of money? What will I do with it? Who in this world can I help?" Let those positive and empowering what ifs speak the loudest.
And I promise you; you won't regret it!
About the Author
by Brenda Friedl, the founder of Flip Houses for Millions, is a teacher turned real estate investor and millionaire. Her goal, as a former teacher, is to empower others to build wealth so they too, can follow their dreams. Visit www.fliphousesformillions.com for free resources on how to find, buy and flip your way to millions. http://www.fliphousesformillions.com
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Yes, You Really Can Invest in Real Estate Without Cash
Do you want to get involved in investing in real estate but don't seem to have any extra money in the bank? This is a common problem, but what you may not realize, is that you can start investing with little or nothing in your bank account. Basically, if you own your own home, you can leverage this asset and find yourself investing in no time flat.
As long as you own your own home, pay your mortgage and have fairly descent credit, it will actually be easy to get started in real estate investing. There is most likely a pretty good amount of equality in your house. Even if you have only owned your house for a short time, you have been paying it off and it is most likely has been increasing in value. Just take a look at the balance of your mortgage and subtract it from its current value. Of course you may need to include a second mortgage or and other liens that may be on your property, but you should still have equality to work with. This is your green light to move forward into investing.
Here three ways to use the equity in your home to raise the capital for real estate investing.
1. Refinancing Your Home - You can refinance your house, get a better interest rate and also get some cash out from a refinance mortgage. You can use the cash to purchase an investment property outright, or you should at least have least enough money for a down payment of a property. Be sure to check with your lender or mortgage broker for any of the rules about cash-out refinancing. Keep in mind, a cash-out refinance mortgage may have higher interest rates than other types of mortgages.
2. Using a Home Equity Loan - A home equity loan uses the equity in your home as collateral, this would be a second mortgage to the one you already have. The mortgage amount is based on a percentage of the equity in your house. You may be able to borrow up to 100% of your homes value, but if you are getting a home equity loan on a second property, you may not be able to borrow as much. This type of loan allows you the option to pay the loan back early without penalty, just a nice little bonus.
3. Open a Home Equity Line of Credit - A home equity line of credit has a credit limit similar to a credit card. This is not much different from a home equity loan, the amount that you can borrow is based on your credit score and the amount of equity in your home. You can transfer funds from your home equity line of credit, or even write checks directly from the account. Interest rates are generally lower than cash-out refinance mortgages, and there are tax advantages as well. Another advantage is that you are only paying interest and making payments on the amount you owe at the time, not the entire amount of the loan. In the future, you may also be able to renegotiate for a higher credit line when the equity in your house increases, especially if you have made improvements to your house.
Real Estate Investing is not only for the rich. The average homeowner can get started in real estate investing even if you don't have a lot of money in the bank. You can use cash-out refinance mortgages, home equity loans, and home equity lines of credit to begin your journey as a real estate investor, and continue to build more investments into the future.
About the Author
by Kevin Kiene
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Investment Properties - Analyzing Their Worth
When you are looking at properties it is often hard to decide what to look for. Establishing your own set of criteria is the best bet. No worries, its not set in stone. You can adjust them however you need as you learn more. But to determine if it is good or not you have to also know whats bad. You can do this by comparing to other ones that are bad.
When my wife and I were looking for our first house we had the following criteria:
- It must have a suite for rental income
- Separate laundries (a demand from the wife)
- Enough available parking
- Suitable interior in both living spaces
From this you can see a few things that were important to us. The financial return and suitable appeal to renters and ourselves.
Since then I have learned so much more about rental houses I am embarrassed at how much I did not know at the time. This will probably be even more true in another year.
Comparing Financials
This is the biggest thing I have learned to compare houses. You can look at a hundred houses without ever leaving your computer and doing a comparison of the financials on them. Create your own spreadsheet (or use mine in the full article) to punch in the numbers for each house you look at and see what type of returns you are looking at. There are two main components to house analysis. What will the cash flow be and what is the overall return.
Cash Flow
This is what cash will be coming in and out of your pocket every month. Rent cheques are the income and then your expenses are mortgage, insurance, utilities, maintenance costs, and any other services you provide.
It is important that you have decent cash flow. If it is negative by a lot, that means you will be paying out of your own pocket every month and this will be hard to sustain. Slight negative and even positive (you are making money) is a good sign.
Overall Return
This is composed of the cash flow, but also takes into account the appreciation/depreciation of the house value and the fact that part of your mortgage payment actually goes to the principle amount on the house (money you are actually retaining).
Positive return is a must otherwise you are wasting your time. You also want it to be reasonably high for the risk you are taking. Anything less than what you can get from the bank or other secure investments is too much risk for not enough reward.
Simple Analysis
This is a quick litmus test for any property you look at. Basically it takes into account the following:
- Mortgage (expected interest rate and house value)
- Rental Income
- Expected House Appreciation
- Expected Maintenance Costs (1% of the house value)
- Taxes
You need to combine these values, adding income and subtracting expenses. It will give you a quick look at what kind of return you will be looking at.
There is a spreadsheet the can be downloaded from the full article How To Analyze an Investment Property.
About the Author
by Neil Galloway is living in Canada with an avid interest in investing techniques for real estate. He currently owns a rental property. If you would like to read more articles by him you can go to thoughtsfrommylife.com.
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