Hello, my name is Dennis; I am a business owner like you with over 44 years of business experience helping business owners worldwide, including 7-figure businesses, small businesses, and startups that now make millions of dollars annually.
But the question is, why do I do this? I had an extraordinary person do something for me in the past to help me. It is hard to understand this amount of sacrifice, but I learned from that sacrifice of this particular person that living is not taking, but when you give to others is when you achieve true purpose and happiness. That is why I do this. I want to serve you so you can achieve the dreams, success, and satisfaction you long for in your business. Servicing others is true wealth and the path to happiness. When you are successful, I am successful. So, with that let in mind, I will tell you about my recent struggles.
But do you want to know something interesting? Just a few years ago, my wife and I were homeless, living in a van and sleeping in the office. This is true! After 30 years, my business was failing, and I was laying off hundreds of employees. I lost $250,000 per month and went down in flaming colors. The only cash I had remaining was the credit line on my credit card, and after I maxed them out, I had nothing but the van and, luckily, a wife who still had faith in me. Creditors were calling; I was being sued and hauled into court to stand before the judge subject to debtor exams. I had judgments filed against and me my coming to the office and seizing assets. I tried everything, but nothing worked. I just kept losing money, more money, and more money — till the money was all gone. I lost my business, cars, airplane, and even the home I was living in. I remember coming home Monday after work, and my wife mentioned that the neighbors across the street were in foreclosure. I said this was sad, but the real sad part is that we are in foreclosure, and the home is going up for auction on Friday. She looked at me, and I waited for her to pack up and walk out. But she did not. She said let us go to Home Depot and buy boxes. We had a huge yard sale for the week, and what we wanted to keep, we moved into a 10×30 storage unit. Saturday morning, we moved into the van and became homeless. Some nights we slept in the van and sometimes on a blow-up air mattress in the office.
Everything gone! No matter how hard I tried, even though I worked 14 hours daily, nothing worked. I was so stressed that I ground down my teeth and cracked every tooth. I had to find another way of making money, and flipping homes looked like a good way to do this. However, after failing, I did not think I could do it, but I heard a voice that said, “what you think and feel is not reality; flipping homes is not brain surgery; it is easy; you can do it.” How hard can it be! You need to get educated and find out how other people are making money by flipping homes. So, I figured it out. I wrote this essential guide to help you.
Your Guide to Flipping Homes – 8 Things You Must Do To Be A Successful Home Flipper
1. Calculate your profit before you purchase the home.
The old saying is, “you make your profit when you purchase the home, not when you sell it.” This means calculating a profit and loss on the project before you purchase. Determine the gain before you buy – work backward. Do not do a project unless there is clear profit potential.
Calculate your profit/Loss. Sales price fewer costs is your profit.
2. Have a good team of Contractors/others to do the work.
3. Get educated.
Do not start buying homes without knowing the process. The best way to get started is to get your Real Estate License. Yes, it is work, but it will give you the knowledge you need to understand how homes are transferred and the laws associated with Real Estate. Also, you will have access to the Multiple Listing Service, which is invaluable for your research. Plus, you can avoid the partial cost of the seller commission when you are the listing agent. Every successful flipper I’ve ever met had their Real Estate license. So, GET IT!
4. Be patient.
There used to be many homes sold on the courtroom steps, sometimes 1,000 homes per day. Today there are not a lot of houses to purchase. Looking at other ways of buying and finding deals would be best. It is going to take time to find, fix and sell. You can do it, but it is going to take time. In the Real Estate Investment world, timing is everything.
5. Have Money.
Do not believe those people on the radio that say, “you can buy homes for no cash down”. It is not valid. You must have cash and skin in the game to purchase the home. Private Hard Money will require a down payment of 20-30% of the purchase price. And it is not going to be cheap when you start. Rates vary from 9-18%. Do not forget to calculate the cost of Hard Money in your profit/loss in item 1 above. Some Hard Money Lenders market their loans as having the potential to fund investment at 100% LTC (Loan-To-Cost), meaning a borrower will not have to put a dime into the project. Although there are some scenarios where this is true, it is rare. Some lenders will participate in the deal. These lenders will fund the deal and share in the profit when the deal is completed. However, all lenders put a great deal of their decision on working with you on your response to #3 above and still require 10% of your money in the deal.
6. Do not buy something you cannot fix or ever sell.
There are a lot of deals out there, and they are deals for a reason. Some are in a bad situation. No matter how much money and work they put into the home, they will never sell it. For example, a house built on top of a landfill, next to a dump, sewage treatment facility, or the final approach to a major airport. You are not going to be able to fix these problems.
7. Buy your project through your LLC.
There are a lot of tax and liability reasons to do this. Plus, private lenders prefer to lend to LLCs.
8. It is going to work.
Do not believe what you see on those flipping shows. You will have to work at it, and it will take time. You must visit the property and ensure the work is progressing correctly. After the home is completed and on the market, you will need to walk the property daily.
“Land Mines” that caused me to fail on flips over the years:
But mostly, I hire the largest home improvement company in the world for carpets, tiles, appliances, and counters. They have a lot to lose if they screw me. They diligently check out the workers and ensure that it is done correctly. So, who are they? Home Depot. Use them; they can get it done and sometimes have huge sales on appliances, carpets, and counters. Does it cost me more? At this point, it probably does, but I do not care. They get the job done on time, and it’s correct. Plus, they give you a warranty on the work.
Get insurance on your property ASAP. But here is one problem with the standard Homeowner’s Policy. That is, there is an exclusion on coverage. Suppose the home is vacant for more than 30 days with no more coverage. You can get a rider that will cover the house for longer. Ask you,r agent. I learned the hard way when one of my flips was broken into, and tools, doors, and appliances were stolen. I thought, hot doggie, I have insurance. I called the insurance company, and they were genuinely lovely to point me to the language in the policy that says no coverage after 30 days of vacancy (you are screwed, dude)—a very costly lesson.
You will have to assume that your flip will get broken into and that items were stolen. So, plan for it. Plan to walk the property every day. Even if no one is working, we must keep a close eye on the home. I have come to flips to find the following: Someone living in the house, the door unlocked, appliances stolen, $1,000 front door gone, neighbor swimming in the pool, A/C gone, pool equipment gone. It is tough out there.
If it is a bad area, I usually wait on appliances until the new owner moves in. I usually put a picture on the counter of what is coming and say it is back order and should be in soon.
So, what do you do first when you own the property?
So, where do you start? I suggest that you start with #3 Get Educated. However, do not pay for those weekend training seminars that cost 1,000s of dollars. Start at your local Real Estate School and get your State License.
Level 4 Funding LLC
Private Hard Money Lender
23335 N 18th Drive Suite 120,
Phoenix AZ 85027,
NMLS 1018071 AZMB 0923961
About the author: Dennis has been working in the Real Estate industry in some capacity for the last 45 years. He purchased his first property when he was just 18 years old. He quickly learned about the excellent investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in Real Estate investing led him to specialize in alternative funding for Real Estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have two beautiful daughters and five amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.