Flipping Houses For Dummies - Roberts Ralph R.

Скачать книгу

on

      ❯❯ Everything you owe – mortgage, second mortgage, auto loan, student loans, credit-card balances, back taxes, and so on

      ❯❯ Your net worth (the value of what you own minus what you owe)

      ❯❯ Gross monthly income

      ❯❯ Total monthly bills

      

Treat your financial statement like a report card and update it every six months to grade your progress. An A+ financial statement gives you the power to borrow money at lower interest rates. See Chapter 5 for more information about figuring out your financial health and using that information to secure funds for flipping. This is true for credit reports, too. The higher your score, the more access you have to other funds.

      

CYA: Cover Your Assets. Don’t overreach and put your current financial health at risk. To protect your assets, don’t finance a house flip with your retirement money … at least until you’ve flipped several properties successfully and are confident that you know what you’re doing. If you’re married, put real estate investments in your name or your spouse’s name, not both, so only one of you is legally liable in the event of a lawsuit involving the property. Establish a home-equity line of credit for financial emergencies and use it only for emergencies.

       Honestly evaluating your debt tolerance

      Flipping properties requires a moderate tolerance for debt, especially early in your career. You have to owe money for extended periods of time before you reap a profit from that debt. Some people just can’t handle debt. What about you? You may be debt intolerant if you

      ❯❯ Pay cash for a vehicle even when you’re offered 0 percent financing.

      ❯❯ Pick up the tab every time you eat out so you won’t owe somebody lunch.

      ❯❯ Prepay your utility bills several months in advance.

      ❯❯ Own only one credit card and use it only for emergencies.

      

Debt can be good or bad. Debt used to finance investments that have a higher rate of return than the interest you pay on the debt is good debt. Bad debt is any debt racked up on spending sprees for stuff that’s worth less now than when you bought it. When flipping houses, loans and their costs can be fairly steep, but if you account for those costs in your budget and still turn a profit of 20 percent or more, the loan and related costs are worth it. (See Chapter 5 for the lowdown on good versus bad debt.)

Taking Your Personality Pulse

      Not everyone has what it takes to flip houses. Some people are too nice, too nervous, too timid, or too lazy to pull off a successful flip. Others may get so emotionally attached to a house that they pay too much for it. And some people can’t handle the math and extra paperwork. Those who excel have the following qualities:

      ❯❯ Energetic: Flipping houses is stimulating, but the work involved can sap your energy faster than an overdue tax notice. Couch potatoes don’t survive.

      ❯❯ Function well under pressure: Few crises are more stressful than real estate deals gone bad. Imagine that your financing falls through, or you discover that the house you just bought is infested with termites, or you put the house up for sale and it lingers on the market for more than a year. When your life savings are on the line and you find yourself in a situation that’s completely outside your control, how well do you think you’ll function?

      ❯❯ Organized: Flipping requires strong organizational skills, attention to detail, and the ability to schedule work for maximum efficiency. If you have these skills, you have an edge over less-organized flippers, but if these skills are lacking or completely absent, don’t give up. Get organized, perhaps with the help of a computer; hire a top-notch assistant; or team up with someone who has the skills you lack.

      ❯❯ Good with people: The most successful property flippers are approachable motivators with good people skills … or they partner up with someone who fits the bill. Being good with people means you can

      • Knock on a stranger’s door without fear of being shot.

      • Calmly motivate others involved in the deal to move quickly.

      • Empathize with the needs of others and meet those needs in a way that’s encouraging and motivational.

      • Be flexible enough to deal with ever-changing situations and quickly develop workable alternatives.

      • Build solid relationships with agents, contractors, financial institutions, and others on whom you rely for help.

      • Let everyone know how valuable they are.

      ❯❯ Assertive without being bossy: You need to know what you want, ask for it, and don’t settle for anything that’s outside your comfort zone.

      

While negotiating the purchase or sale of a property or trying to convince someone to do something for you, remember that “no” doesn’t necessarily mean “no.” Often it means “know,” as in “I don’t know enough yet to say ‘yes.’” Being assertive often means finding out what’s holding the person back and addressing that issue.

      ❯❯ Good with numbers (or a calculator): Flipping for profit requires rudimentary math skills – addition and subtraction with a little multiplication and division thrown in for good measure. To keep your bottom line black rather than red, you simply have to make sure that you sell the home for more than you invest in it. Loan calculators and other useful tools are readily available in personal-finance programs, such as Quicken, and on the web. (Visit bankrate.com, for example, and click Calculators.)

      ❯❯ The ability to handle rejection, failure, and success: Flipping houses has its ups and downs. You need to be able to ride the waves:

      • Rejection: Rejection can come in the form of denial for a loan, a buyer or seller backing out of a deal, investors or partners abandoning you, or nobody showing up at your open house.

      • Failure: Even the most experienced and successful flippers encounter setbacks. They may underestimate the costs of repairs and renovations, underestimate the time required to sell the house, or even have to sell a property at a loss.

      

Don’t get discouraged if your first flip flops. Flip at least three properties before you make the decision to skedaddle. Some of the most successful real estate investors have failed their way to fortune.

      • Success: Success comes with its own set of problems. You may find a great deal and talk yourself out of it. You may put the house on the market, receive a good offer the first day, turn it down waiting for a better offer, and never get that better offer; I know how hard that is to handle. Or success may lead to overconfidence that results in failure.

HOW BAD CAN A HOUSE FLIP BE?

      We (Ralph Roberts and company) discovered a fantastic foreclosure property – a $2 million beauty we could get for a cool $900,000! Although the owners, whom we refer to as Mr. and Mrs. Rose, were going through a divorce, they seemed willing to work with us at first. They even convinced us to let them stay in the house while we were rehabbing it. (Letting people stay in the house is always a bad idea. We agreed to this to get the deal done, but when you’re flipping a house, you want to close on it only when it’s vacant and “broom clean” and, in the case of foreclosures, the redemption period has expired; see Chapter 8 for more about redemption.) Mr. Rose lived in one half of the house, and the Missus resided in the other half.

      As soon as the

Скачать книгу