Posted By: Sean Terry | January 5, 2009
How To Make Huge Money in Real Estate in 2009 | Part II
Make sure you read Part I so you will understand Part II
Has the fix and flip model gone away? Absolutely not! There is huge money to be made from buying distressed houses, fixing them up and selling them to investors or end users.
I’m going to share with you the 2 best methods to make huge money fixing and flipping properties.
When buying a house for a fix and flip you have to determine which exit plan you’re going to take prior to acquisition:
1. Fix and Flip to a Investor
2. Fix and Flip to a Owner Occupied
Fix and Flip to a Investor
1. You must understand how to “Value a Property”, reading this post will help you understand how to do this.
2. You must understand how to “Buy at the Right Price”, reading this post will help you understand how to do this.
3. Now that you have the basics down and you own a property the fun begins, I love the renovation process because you have the ability to make a big difference in a neighborhood by making the worst house on the block into the best house on the block. The ugliest of houses can be revived into a beautiful living environment for a new family. Check out this ugly house we renovated several months ago: Case Study.
There are 6 keys to successfully renovating a property and keeping it within budget and on time. Make sure the contractor is licensed and be sure to check references.
1. Always get a hard bid, with the understanding that all changes will be handled through a change order.
2. Always get at least 2 bids, you really want to make sure you’re getting the best deal you can.
3. When getting a bid, ask the contractors to give you a written time-line. Most of the time the contractor will over estimate on time needed.
4. Establish a penalty for exceeding the time-line, i.e. build in a $50–$100 a day penalty.
5. Establish a bonus if they complete early, i.e. give them an extra $500–$1000 for early completion and let them know you might have other houses.
6. Always do a complete a walk through of the house and DO NOT pay the contractor until ALL work is complete.
4. Find a tenant on a 12 month lease, to do this place a sign in front of the house and at the closest major intersection also post an ad on CraigsList.
5. You now have a renovated investment property with a tenant in place that you bought at a great price. I would suggest selling this property to an investor with some built in equity. You can decide how much but we sell all of our properties to investors with guaranteed 25% equity. If you would like to learn how to find investors please read Part I.
For this property on Redfield we bought it from the bank for roughly $76,000 and spent ~$18,000 on the renovation. The home appraised 3 weeks ago for $176,000. We sold it to an investor out of California for $139,500. The investor gets $36,500 of instant equity, tenant in place with no risk and we make the spread. Win-Win!
What’s next? I will show you how to Fix and Flip to an Owner Occupied Buyer. Much different… Stay tuned…..
Lean more on How To Buy Cash Flow Properties for Only $7,500 Total Out of Pocket