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Flipping Houses is the best way to build fast cash in real estate investing. An estimated 90% of the world’s millionaires made their money through real estate investing. But how can an ordinary individual flip houses and make a substantial amount of money in real estate investing? What are the main things you need to understand before going to invest in a house? And why is it important to educate yourself before real estate investing? In this article I will go over several ways that will assist you in your real estate investing venture.

Tip number 1: Find your Buyers First

In order to make money in flipping houses, it makes sense to find buyers first. You can build a buyers list by calling we buy houses signs, attending real estate auctions, working with real estate agents and using the Multiple Listing Service as well as other simple strategies and tactics. The best strategy to use if you ask me would be to target buyers that have a history of purchasing properties for cash.

Tip number 2: Gather Necessary Information

After you find the buyers the next thing you need to do is find out what your buyer’s interests are. You can do this by asking them for the areas of town they are interested in. How much they are looking to spend on their ideal property? What type of property they are currently buying? And how fast they can close? Getting these questions answered will give you an idea of how to approach your buyers.

Step 3: Finding Sellers

If you want to make money in real estate investing you have to understand that working with motivated sellers is a must. But what is a motivated seller? Motivated sellers can be anyone who is financially, or physically distressed. An example of a motivated seller is someone who is getting a divorce, going into foreclosure, paying 2 mortgages, need to rehab their property but don’t have the cash, going bankrupt, etc. Therefore, in order to get a great deal in real estate investing you have to find someone that falls within this category. You can find these sellers using various forms of advertising.

Tip number 4: Pre-screen the Seller

When your advertising is working and the motivated sellers are coming in, in order to really get a good house flip you want to get as much information from the seller as possible. You can do this by asking the seller for information on their property. You want to find out what type of condition the house is in as well as the asking price of the property, but the most important question you need to know is why the seller is determined to get rid of their property.

Step 5: Getting Comps

Once you receive the information from the prospect, the next thing you need to do is run comparable sales to see if the deal will be a good house flip. You can do this by going to sites like Realquest.com, Zillow.com, Bank of America has a home value estimator and you can find it by going to Google.com and punching in Bank of America Home Value Estimator. You can also use sites like Eppraisal.com, or consult with a Realtor. There are many ways to run comps when you’re looking to find out what a house is truly worth.

Step 6: Work the Numbers

After you get the comps for the house the next thing you need to do in order to flip a house is work the numbers. You can do this buy understanding the MAO formula. The MAO formula is as followed: You take the ARV (After repair value) and you multiply it by 65% and that leaves you with the amount that you’re willing to pay for the house. Then you subtract the rehab cost, closing cost and overhead and that leaves you with the MAO or (Maximum Allowable Offer) that you can make on the house.

Action Step 7: Getting your Offer In

Once you have the Maximum Allowable Offer the next thing you do is make the offer. Your offer should be less than what your MAO is. The best thing to do in this case is to subtract and additional 10% off of the MAO and start you’re bidding with the motivated seller from there. Negotiations can make or break your deal when it comes to investing in real estate so make sure that you’re sincere and very clear with the seller from the very beginning.

Tip number 8: Make Money

Once you get all of this done, you need to approach your investors list that fit the criteria of the particular property. Doing this will allow you to sell the property rapidly, being that you have pre-screen the buyers and you know that they can close fast! Once you have solid buyer then all you need to do is send the contracts over to the title company and wait for your check to come in the mail. The best strategy to use in real estate investing would be to sell the property for less than the market value without rehabbing it. This is called wholesaling the property.

Copyright 2010 Jamel Gibbs

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Comments (0) Feb 01 2010