Ten Guidelines for Greater Success When Flipping Houses

Updated: Mar 5

This blog is written by Jen Josey, Real Estate Investor, and REIGN Coach. She is not a professional writer and writes like she talks so put your red pen away.  Jen is extremely opinionated but reserves the right to change her opinion at any time because, well, that's the way she rolls.  She may also use colorful language so don't be offended.  Jen does not claim to be an expert, she is just sharing her personal thoughts and adding a perspective on investor topics that may benefit her readers.  Jen also finds it strange to write in the third person.  Enjoy!


Real estate is how I suckered my husband into marrying me.


Vance and I had dated previously, broke up but remained friends for years. When we got back together, I asked him to go look at houses with me, you know...just to see our likes and dislikes. Instead of being armchair quarterbacks, we were accomplished couch critics of every HGTV show out there, just ask us. Why not spend a Saturday checking out properties and applying our expert knowledge in real life? We were clear with our realtor we were just looking but instead, found an amazing house. Within a couple of hours, we were sitting at a bar discussing the house with our realtor and we all agreed it was a great opportunity. The conversation went like this...


Realtor: That IS a great price for a house like that.

Vance: It really is.

Jen: Well, I'm not getting into a mortgage unless I'm married.

Vance: I'm not getting into a mortgage unless I'm married.

Realtor: Ummmm...what's happening here...

Jen: Then let's go to the courthouse.


Five days later, we were married. A day after that, we put an offer on that house and got outbid by another buyer. Wait, what? "We got married for NOTHING!" I said, feeling defeated. Yep, those words actually came out of my mouth. This was the first lesson we had in handling disappointment with real estate. A better lesson we learned is that once we shook off the setback, we quickly rebounded and moved on to the next. These lessons are the basis for how we have built a successful real estate investment business today.


1. Don't get emotional

Real estate can be such a roller coaster on your emotions. After years of watching renovation shows, producers know how to promote the "happily ever after" for the new homeowners. In reality, there are inspections with ridiculous punch list items, unreasonable negotiations, absurd comps, uneducated reviews, and more. When you are renovating a property, you must make decisions based on what sells and not the pretty shiplap Johanna vomits on every wall in her flips. Sadly...to the disappointment of many, this takes away a lot of the flipping fantasy fun out of most projects.


2. Education is invaluable

This is by far the most important pill you must swallow if you have made a decision to start flipping houses. There are tons of free resources out there to educate yourself but when you invest a painful amount of money into a program, that is incentive alone to make it work. We have invested tens of thousands of dollars into our education and when backed by action and implementation, we have made our money back tenfold. When you invest in your education, you are given tools to use so you don't make costly mistakes that can run your business into the ground.


When choosing an educational program, choose one that feels right to you. There are so many out there but stay away from the ones that are quick to bash others. If they have to win you over by telling you how awful all the others are, they typically suck at what they do. Pretty standard in the educational industry is to offer a free two-hour event and then up-sell you to a $200-$500 three-day event. Then you get hit with the much larger up-sell to their lifetime mastery program. If their systems and educational plan make sense to you, then you've found your people.


3. Numbers don't lie

You make your profit when you buy the property. A huge benefit of a reliable education lies in evaluating properties properly. You need to know repair costs, holding costs, and most importantly, the after repair value (ARV) of that property. A simple formula many investors use is MAO = Maximum Allowable Offer. You take the ARV, multiply it by .75, and then subtract the repair costs to come up with the MAO. The .75 represents your profit along with the holding costs which include realtor fees, monthly utilities, interest to lenders, etc. Here's an example:


$350,000 (ARV) x .75 - $65,000 (repair costs) = $197,500 (MAO)


This is why education is so important so you know how to calculate these numbers. One missed repair item can cause your whole project to go upside down. If you choose the wrong comps to base your ARV, your renovation can sit much longer on the back end.


4. Know your exit strategy

There are a few options when buying properties. The most popular is flipping, which can have a large profit but can also provide the most headaches. Another is buy and holds, AKA rentals. Buy and holds may be the best exit strategy in an area where active listings are sitting longer or if there is a high demand for rentals. Another popular exit strategy is to wholesale properties. Wholesaling means getting a property under contract and then selling that contract to another investor. If you find an amazing deal, the wholesaler may make as much money assigning that contract to another investor as they would if they rehabbed it themselves...minus the time and headaches.


5. Don't cut corners

This is my biggest pet peeve with other investors in the area. Many times, they are uneducated with their numbers and buy the property too high and end up putting a crappy product on the market. Realtors have learned to be extra vigilant when showing "flipped" properties to their clients. If you strive to be successful in this industry, you need to provide a safe home for the future homeowner. Realtors learn quickly who not to deal with and that information spreads quicker than the coronavirus. On the backside, this can work in your favor when selling your finished rehab and the only other active listings nearby were done by inexperienced flippers.


6. Your network is your net worth

Real estate investing is ALL about who you know. Attending network events is vital to find support in every area of investing. Using your social media to show before and after photos builds your credibility among your friends and increases referrals. Sharing vetted contractors with other investors is a huge time (and money) saver. Telling everyone you meet about your business will lead to private money lenders to fund your projects. Finding accountability partners can fill that void of missing water cooler talks at work. Team members can include but are not limited to real estate agents, attorneys, contractors, supply houses, inspectors, photographers, appraisers, lenders, etc. (To build your network with other like-minded real estate investors, check out www.REIGNmastermind.com )


7. Get a coach / be a coach

As mentioned before, education is so important to your success as an investor. Going a step further in finding a local coach or mentor that knows your area. It could be someone you met at a meetup group that has more experience than you. It could be a legit coach that charges a certain amount per hour. Whatever the level of coaching, PLEASE put value to their time. Asking an experienced investor to grab coffee so you can "pick their brain" is just plain annoying. But if you offer to help haul junk away from the hoarder house they just bought, THAT is much more favorable to them. Ask if you can address marketing mailers for them or help stage their new rehab. You not only get to ask questions the whole time, but you will get some actual, on-site business experience.


While you should always remain coachable regardless of your experience level, coaching others can be very beneficial. Allowing a newbie to shadow you when you look at properties will only cause you to be more detailed when determining numbers. They will ask questions that may bring to the surface something you missed. Vance and I enjoy working with inexperienced investors and developing relationships. A few were grateful for our time because they realized they were not cut out for this business but then became our best private money lenders for they understood the advantages of investing in real estate.


8. Do your due diligence

Always do an inspection by a professional prior to buying the property. If it's determined you need to bring in an additional specialized inspector, do it. You want to uncover any additional repair items before you purchase the home so you can adjust your repair budget. You also need to determine an accurate ARV by studying the comps in the area. Just going by the price per square foot from other sales won't work. All sales are not created equal. You want to find recent sales (not pending sales) that have the same bedrooms and baths, same age, and approximately the same size lot. If theirs has a garage and yours doesn't, take money off. If yours is on a busy corner and the others are not, take money off. If yours has amazing views and theirs do not, up the money.


9. Don't be afraid of "no"

Surprisingly, this is the main reason so many investors take months if not years to get their first deal. They pay a butt load of money on their education, use the proven systems to run numbers, and never present an offer for they think their number is too low and might be offensive to the seller. Now...many times...that number WILL be offensive to the seller. You can't let this stop you. You NEVER know what is going on with them and how motivated they may be. Maybe it's a home where the couple is going through a divorce and they need to dump it fast. Maybe it's a family that is struggling with medical bills and you are saving them from foreclosure. Maybe it was a property inherited by a distant cousin three states away and they will take anything that's offered. Maybe they are empty nesters and can't afford costly repairs before moving into their retirement villa on hole #7 off Donald Ross Blvd. The answer will always be "no" until you ask.


10. Know when to walk away, know when to run

So many people get caught up in getting their next (or first) deal that they start to fudge their numbers just to make it work. Trust in your education and remember that numbers don't lie. Bidding wars can also get dangerous. Emotions can drive you more so to get the "win" than to stick to your guns. If an inspection report uncovers more foundation issues than you budgeted for, you need to suck it up and run, Kenny Rogers. Losing the deposit (due diligence) money and the money you paid for the inspection report is far less than $20K in foundation repairs.


Shortly after Vance and I lost out on that first house (reminder...the house we got MARRIED for), we put an offer on another house immediately. There were so many things wrong with this second house but my emotions were high. I was determined to shut up all our friends and family that freaked out when we got married under such short notice. Thank goodness that deal fell through too for we were not thinking clearly. We took a breather and waited a few days before looking at more houses. Then it happened...a beautiful house came on the market and it looked just like the first house. It was listed for the same amount and was in a MUCH better neighborhood. It didn't have the flowered wallpaper we were going to have to remove AND it had a screened porch which was a feature the first house didn't have. We crossed our fingers and submitted our offer.


And just like those HGTV shows, we too got our "happily ever after..."



**Read more blogs by Jen Josey at www.REIGNmastermind.com.

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