By Greg Herlean
Mike and I were talking the other day about how far we’ve come since we started working together on our real estate investment endeavors, and it got me thinking. When a lot of new investors start out, they feel completely overwhelmed, and that’s more than understandable. There’s a lot of commitment involved in buying and flipping a house, and it can be pretty intimidating when you think about the fact that you’re using someone else’s money and that you’re responsible for paying them back, no matter what happens with your property.
One of the things I’ve seen Mike do over the years, and something that I’ve helped a lot of new investors with, is to break the process down into three phases. When you think about house flipping in these terms, it’s a lot easier to stay focused and see what’s in front of you. Instead of feeling overwhelmed at all of the things you need to do to make your house flip work, you’ll focus on a particular phase and the things you need to do to move on to the next phase. It’s a methodical approach, and it can help you stay calm and productive, even when it seems like you have a million things to do and no time to do them in.
Phase One – Finding and Acquiring a Property
For most people, getting started is the hardest part of flipping houses. However, I’m going to leave out the very first step in the process, in which you do all of your research about flipping houses and real estate investing. Why? Because most people don’t have a problem doing research on the Internet or asking questions of real estate professionals. They have a problem when they actually have to dive in and commit to investing money (theirs or someone else’s) in their new flipping venture.
So let’s make it a little easier. In this phase, you’ll be scouring the MLS, driving through neighborhoods where you want to flip, talking with your real estate agent about the properties they like for you, as well as calling and sending out mailers to motivated sellers.
It can seem like a lot, but this phase is probably the most work-intensive phase for you. Keep that in mind as you look for properties and make offers, and remember that this work will pay off in the long run, especially if more than one of your leads turns into a deal.
At the end of this phase, you’ll find a property you want and make an offer. At the same time, you’ll be going to your investors or lenders and pitching the deal to them. When you have the cash, and you close on the property, you’ll move on to the next phase.
Phase Two – Rehabbing the Property
Rehabs may feel like the biggest part of your job, but they really aren’t. In this phase, your contractor will get you to approve a budget on materials and labor, and the two of you will work together on the design and materials you need for the property. You’ll check in regularly, but during this phase you won’t have a lot on your plate (except starting phase one for your next flip).
Phase Three – Selling the Property
Finally, you’ll work with your realtor on marketing and selling the property. Again, this is a pretty low-maintenance phase for you, and it shouldn’t be too difficult to work on phases one and two on other flips at the same time.
When you break down a flip into three phases like this, it gets a lot simpler, and you can start to see how people like Mike can flip multiple properties at once. Once you get started, it gets a lot easier as you learn how to streamline the process.