5 Secret Skills to Successful House Flipping
Adam Luehrs is a writer during the day and a voracious reader at night. He focuses mostly on finance writing and has a passion for real estate, credit card deals, and investing.
If you’ve been paying attention, you know that people are building personal empires by flipping houses. What is it that makes it possible for some people to strike it big using properties that are accessible to us all?
It takes a combination of fearlessness, measured caution, and the ability to see what others don’t even know to look for in order to build success as a house flipper. Let’s peel back the layers to uncover the secrets of successful house flippers!
Successful house flippers don’t wait for permission from anyone
House flippers don’t typically wait until things are "hot" or "safe" in a market to make offers. They’re constantly looking for opportunities that other people don’t see. As a result, successful house flippers know that they have to act quickly on every deal. Flipping is a volume game. You’re only making real money when you’re in a cycle of closing, flipping, and reinvesting with quick turnaround times. You’re probably already too late if you’re waiting for "analysts" to give you the okay.
Here’s a rundown of how fast flippers make moves responsibly and wisely:
- They aren’t afraid to invest in renovations. Flipping isn’t for you if you’re going to wince every time a check needs to be written to cover renovation costs. Yes, it’s great news if you have the prowess to completely renovate a flip property on your own. However, the news isn’t so great if it’s going to take you exponentially longer to get the work done than a professional.
Too many new-to-the-game flippers aren’t successful because they hang on to properties too long because they’re overconfident in their own abilities. Many also greatly overestimate their ability to "cut costs" without ignoring very serious and necessary fixes. Be careful about analyzing money saved versus time wasted when it comes to doing all of your own repairs and renovations.
- They don’t let buyers waste their time. Flippers who aren’t careful often get burned by buyers who can’t really back up their offers. While it’s common, it can be avoided if you’re prepared. There is a real temptation to get overly excited when a buyer comes along after you’ve just spent months finding a property, coming up with financing, fixing a property, and listing a property. It’s easy to see why’d you jump at the first offer. However, there is always the danger that a buyer isn’t serious. After all, there is excitement on the buyer end about seeing a beautifully renovated, like-new home that is reasonably priced.
Be picky about proof of financing to ensure that buyers don’t tie you up. You could lose a month or more by letting your property sit while you work with a buyer who ultimately doesn’t come through. Always think of your flip house as a "hot potato" that you want off your plate as soon as possible before market changes, economic conditions, or natural disasters throw a big hassle your way.
Successful house flippers know how to make pricing work in their favor
Choosing a listing price is one of the most stressful aspects of flipping houses. It’s hard to select a listing price with impartiality because the number you select ultimately reflects how much you are deciding you "deserve to get paid" for all of your hard work. This emotional aspect of flipping is precisely why so many house flippers get stuck with homes that can’t sell.
Unfortunately, a stubborn mentality kicks in where a flipper lists a house for far too much. As a result, the house sits on the market without offers. This is simply bad optics. The house is already questionable by the time watchers see the price dip in subsequent months. If you’re following the "fast flip" mentality, it’s better to list a little lower with the potential for a quick sell than it is to hold on to a property with full liability for a few extra months.
Successful house flippers immerse themselves in every aspect of the process
One lesson new house flippers learn very quickly is that the "physical" aspect of flipping a house is only one part of a much larger picture. Yes, this is why not everyone can make it in this industry. As a flipper, your goal isn’t just to transform a property into the most beautiful, sellable version possible using a careful equation that still allows you to take away a nice cut. You have to create the right environment for offers. Here’s a look at what successful flippers do behind the scenes to close deals:
- They’re always looking ahead to the next property while being fully immersed in the current property. This means devoting a chunk of each day to generating leads. This can be through strategic advertising tipped toward "anticipated" sellers, mail campaigns, scouting "neglected" properties in driving tours, and networking with real estate agents to get access to foreclosures.
- They get their hands dirty with buyer financing. Professional house flippers know that making a property more accessible to a buyer than the seller down the street can be the clincher. Now, you don’t want to get caught up with buyers who can’t come up with reliable funding. However, you do want to be willing to work creative terms into an agreement that make it easier for a buyer to finalize a sale. Being open to creative terms doesn’t mean letting the buyer eat your lunch. You’re simply leaving room for the buyer to get more of what they want in areas that won’t expose you to vulnerabilities or liabilities.
- They ask buyers to "show" instead of "tell" on the way to closing. The biggest mistake that costs flippers to drop out after getting burned on the first flip is assuming that a buyer is truly in the position to back up an offer. To avoid getting burned, learn the art of ensuring that buyers really can obtain loans before getting your hopes up. If it’s a cash offer, that means verifying cash availability. If it’s a financed offer, that means being proactive about communication with a buyer’s mortgage broker to verify credit and financial standing.
Successful flippers are passionate about properties and renovations
In reality, there is no barrier to entry for house flipping. There’s no law that says you have to be a licensed contractor to dig into a big renovation. However, that doesn’t mean that you should be naïve when going into the process if you don’t have experience with renovations.
The art of buying from the bottom to be able to sell at the top requires a real passion for renovation work. It’s that passion that’s going to drive you when you realize a pipe is busted, a furnace need to be replaced or massive parts of a home need to be brought up to code. Are you viewing these things as challenges or burdens? This is the question that separates people who are jumping on a trend from people who were born to do this.
Successful house flippers know how to gather the right people
One of the big appeals of becoming a professional flipper is having the ability to work for yourself. However, this doesn’t necessarily translate to working all by yourself. As an REI expert, you’re tasked with knowing how to utilize the support and resources of other professionals. What does this look like? Here’s a rundown of just some of the people who need to be on your "team" when you’re a flipper:
- Local real estate agents
- An appraiser
- Contractors who can provide fast, accurate estimates
- Local mortgage professionals
- Local companies willing to collaborate on marketing
You never want to be in a position to be scrambling to bring in an appraisal expert if you spot a property that looks promising. The goal is to have an established relationship with someone you can simply place a call to when decisions need to be made quickly. The same goes for contractors. In some cases, you may need to have your "person" swoop in to do a quick assessment to give you a realistic total before you can make an offer. Having your team in place is going to give you a real advantage over someone who is simply relying on guesswork when making an offer.
Final thoughts: Successful house flippers are always wearing two hats
Being a successful house flipper is never boring. While it’s true that many flippers get to scenarios where they have a lot of freedom to enjoy the fruits of their labor, there is always an element of "hustle" in this industry. Flippers who are in the game because they love it wouldn’t have it any other way.
The bottom line is that a house flipper is always wearing two hats. The first hat is the "investor" hat. With this role, you’re looking carefully at the reality of the numbers to see what each property can realistically produce for you. The investor part of you is focused on doing due diligence regarding selling prices for comparable properties, investment financing, repair costs, and property sourcing.
The second hat is the "contractor" hat. This is where your ability to see things that others don’t see comes into play. You’re always in a mode of playing around with your renovation budget to squeeze in upgrades and details that get homes sold.
If you’re a two-hat thinker, the sky’s the limit! The way to build success is to do your homework on that first flip to ensure that you’re not falling into one of the common mistakes that investment novices make. Be prepared to do your homework, research favorable financing options and clear your schedule to devote all of the brainpower and elbow grease you can muster to your first flip home!