The Ten Commandments of House Flipping
Every profession and every discipline have a set of best practices by which one is most likely to be successful. Real estate is no different. For those of us who earn our money buying and selling houses, there’s a catalog of time-tested safeguards to make sure that at any given time, you are making the very best investment. This is my list of 10 such best practices, my commandments, if you will.
1. Do not waste time with an unmotivated seller.
A motivated seller will answer your questions. An unmotivated seller will ask you questions. A motivated seller will help you buy his house. An unmotivated seller will fight you all the way to escrow. A motivated seller will pay you to buy their house. An unmotivated seller will take equity from you and cost you money. The bottom line is an unmotivated seller is a time waster. Don’ spend any time with them.
2. Always check the title before you part with a substantial amount of money
One of the best uses of your time as an real estate investor is checking out the title of any property you intend to purchase. That’s why you want to build a strong relationship with a reputable title company in your area. You have to take into account any encumbrances on the title of a property before you ever negotiate the deal and most certainly before you part with any money.
3. Do not give money to a third party, especially when they are not on title.
Skip the middlemen. All they really do is add to your purchase cost. If you’re in the business of house flipping, two things are always really important – time and money. Middlemen place unnecessary claims on both. Always talk directly with the owner of the property. Don’t cut deals with lawyers who take a cut off the top and don’t mess around with agents who work on commission. Your loss is their gain. Do the deal between you and the owner. This is the best way to keep the deal simple, quick and affordable.
4. Remember that you cannot get a discount from the agent.
Real estate agents work on commission. The last thing they want to see is a reduction in the price of a house. So if a property is overpriced, you stand a much better chance of getting the price down when you negotiate with the property owner, not an agent.
5. Always listen to your hard money lender.
Hard money lenders will be objective. They will never tell you a property is worth more than it is because their money (or their clients’ money) is on the line. If the hard money lender tells you the property isn’t worth the owner’s asking price, listen.
6. Don’t create emotional attachments.
A house is a house is a house. I know you’ve been sold this wonderful American Dream, but it’s just a dream. Do not invest emotionally in any house. This includes the one in which you live. If you can’t make money going in, walk away. If a house is not an investment (an asset), it is a liability. And wealth does not come from an abundance of liabilities.
7. Know your value. Sellers need you more than you need them.
There are 1.3 million homes in foreclosure alone. There is no shortage of housing inventory from which investors can choose. So believe me when I tell you that the seller needs you more than you need the seller.
8. Don’t get discouraged by lost deals.
This deal isn’t the last deal. House deals are like buses. If you miss one, another will be along shortly. Remember that. Whether a deal works out fine or the real estate deal goes south, you can wash your hands of the situation and walk away. Another deal will be along very soon.
9. Don’t make house flipping about buying houses.
It’s about profiting from the sale of a house. Anyone can buy a house. Believe it or not, purchasing a house relies more on your skill than your credit. But the real test of a real estate investor is whether or not she makes money buying and selling houses.
10. Always ask for the discount.
I don’t care how well-priced the house may be. It can be under-market already. But ask for the discount. Ask and ask all the way until you close on the property. Don’t be ashamed to ask the owner to reduce the price. Not because you can’t afford it, but because she may agree to the price reduction!