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Real Estate Flipping 101 the surefire path to success.

Discussion in 'Real Estate Investing' started by kurtyordy, Sep 4, 2007.

  1. kurtyordy
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    kurtyordy Bronze Contributor

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    Here is my attempt to give back, I hope it helps some of you. If you wish to rip it apart, feel free. Maybe much of this is old and rehashing, but it is how I see it, and I hope it helps. I offer a money back guarantee that you will learn how to flip if you follow these steps. If you want me to honor it, you must first send me some money, so I have money to return to you in the unlikely event you have the IQ of an earthworm.

    First, before you walk down this path, you must acknowledge a simple fact: not everyone is cut out to be a flipper. If you are one of the folks in this majority, do not despair. There are other ways to make money.

    Second: The purpose here is so you can determine whether or not flipping is for you, and do so with out losing much money if you are not. If you are it will give you a beginning nest egg to invest from.

    Step one: pull 1k out of your savings account. “What!,†you say, “I don’t have 1k.†Then you should not be flipping!!!!!
    In one of the books I am writing, one of the chapters has to do with stopping the bleeding before attempting to climb Mt. Everest. The point being, if you have not shown enough financial discipline to save 1k that you are willing to lose, then you should not even be considering flipping.

    Step Two: Begin scanning the papers, look around as you take different routes home from work, look at the auction adds for your area, and look on ebay for a CAR!
    Utilizing KBB.com, buy a 1k-1.5k car for $600. “But,†you snivel, “I do not know how to tell what is wrong with a car. I would not know what to look for. What if the car breaks down and cannot be repaired?†My answer- then you only lost $600 instead of $600,000 dollars, so shut up. Do you honestly intend me to believe that you know more about repairing a $100,000 house and limiting your losses than you do on a $600/car. “But a car is not a house,†you whine. No but all the principles are the same, just on a smaller scale.

    On the buying side you will learn: negotiating a good deal, how to find a good deal, the diligence necessary to find said deal, what your personal requirements are for a good deal.,

    While in possession of the car you will learn: how to negotiate with contractors (mechanics), how to evaluate a mechanics work, how to fix what is necessary vs. what is extra, and how to live with some of your money at risk.

    Through selling you will learn: how to market a product for sale whether on your own or utilizing an outside sales agent, how to negotiate with buyers, if you do it right, you can learn and test the power of using ebay vs the local paper vs consignment on a local lot.

    Through it all you will learn whether or not you are cut out for flipping. Remember all the players are the same, just less money involved. If during the process you find you do not like this whole flipping thing. Drive the car, or tow it to the nearest junk yard. If you drive it in, they may give you $100-$200 dollars for a running car. Now you are done with it, you only lost a few hundred bucks, and you can scratch flipping of your list of possible investment vehicles.

    If you like it, keep repeating the process. Do not take your profit and move up to a more expensive vehicle until you have done about 10. The next step before that would be taking the profit from 3 or 4, and doing multiple cars at once. This will give you a small taste for juggling multiple house projects at one time. After doing this enough times, and if you still find you enjoy it, save enough of your profits to buy your first real estate flip. I recommend doing at least 20% down if not more. The more you put down, the bigger the cushion if you have to cut you losses. Remember any money is ever invest is 100% lost until it puts money back in your pocket.

    I recommend always staying in the entry level home market. In my where and when, that is homes <150k. I like the entry level because there are always buyers. People always need a house, but they do not always need a $1,000,000 house. Plus the lower the entry point, the easier it is to cashflow as a rental if need be.

    Flipping is a numbers game. You have all heard the 100:10:1 rule, will just apply it to cars to practice. You would not turn over you money to a money manager without some sort of track record, why would you turn all the flipping liability over to yourself without a track record?

    Let me end by sweetly saying If you cannot hack it flipping cars, you have no business whatsoever flipping houses, so learn something else!
     
  2. andviv
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    andviv Gold Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    Great post. Rep++
     
  3. JesseO
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    JesseO Contributor

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    Hey Kurt, great post =) I was wondersing how many homes you've flipped in the last few years? Is it getting easier with the "soft" market we now have, or is it harder or the same?
     
  4. Allthingznew
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    Allthingznew Contributor

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    That's a great idea. It makes good sense, enough sense that I would issue one caveat:

    I read somewhere, maybe someone will know this info, but if you buy and sell too many cars in a year they make you jump through the dealer hoops, so first know the number of cars you can sell in your state per year w/o being considered a dealer and either get to the house level within that number or make sure to stretch it into the next year.
     
  5. kurtyordy
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    kurtyordy Bronze Contributor

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    Thanks for the rep.

    I have flipped 5 personally and advised on about 5 more. I hate flipping. I love the buying part. Nothing thrills me more than beating a buyer down in price, or finding a fantastic deal. That is so much fun. Other than that I hate it. Yes I could get contractors, but I hate dealing with contractors. Could I partner, tried it, not found the right one yet. Also, I hate selling.

    All that to say that the acquisition piece is about to get much more fun with the current market conditions. I may have to bite the bullet, too much money to be made, we shall see.

    Allthings- excellent point about the licensing, totally forgot. Go up to your state limit for the year, then do it under your wifes name, or wait until the following year, or start and llc to flip up to the limit in that entity.
     
  6. xboxundone
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    xboxundone New Contributor

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    nice right up for those looking to venture into this area.
     
  7. TheBigIdea
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    TheBigIdea New Contributor

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    What about the tax consequences as well with buying / selling cars? Would you have to register each vehicle, title it, and pay tax, get inspection emmisions etc. It seems this would eliminate alot of profit on such a small deal. Or can you avoid titling vehicle in your name and repair and resell while avoiding all the taxes and inspections.
     
  8. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Admin Post
    Nice analogy and write up ... speed++
     
  9. ToddW
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    ToddW New Contributor

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    I know in CA you can only sell X number of cars per-year before you need a license. Emissions is based on the vehicle year, diesel, etc, and in CA we don't have inspection on instate cars only ones purchased out of state and brought in. I think you are going to have to look to local regulations to get this question answered for you.

    I've known people who get around the law by not transferring the car into their name and flipping the car within the DMV allotted registration period so they never really "own" the car on paper.
     
  10. 8 SNAKE
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    8 SNAKE Contributor

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    I can't speak for the OP, but I get the feeling that flipping cars is more of an education than a profit machine.
     
  11. kurtyordy
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    kurtyordy Bronze Contributor

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    Exactly, and the education is more about learning about yourself and the learning about flipping is secondary.

    In learning about flipping, if you cannot account for the transfer/registration fees to turn a profit, how the heck can you learn to account for the realtor fees, transfer taxes, repairs etc. If you cannot learn to turn a profit on the cars, I doubt you can in real estate, especially in this soft market.
     
  12. LightHouse
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    LightHouse Legendary Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    It would also depend on how long you want to hold over. Some guys flip cars with out possetion of the title. Also probably illegal but probably alot like bird dogging in RE.

    Good analogy none the less.
     
  13. canon94
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    canon94 PARKED

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    Excellent metaphor and good to put in use.

    A lot of people seem to think flipping takes about 30 minutes because that is all it takes them on the shows. Much more involved and flipping the cars is every skill you will use to flip a house on cheaper if you screw it up.
     
  14. kurtyordy
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    kurtyordy Bronze Contributor

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    I know, and it is so much more than that. People don't realize that if they would just wait a few extra months and do these practice steps first, they will either find out it is not for them, or have developed better skills to move forward. Fortunately the market cooling is clearing out some of the pretenders, but I just hate to see people go through the wringer to find out an investment vehicle is not for them.
     
  15. bosco
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    bosco New Contributor

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    I did exactly what kurt did with cars. I purchased every day drivers first. It's amazing how much more you can get for a car if it is spotlessly detailed! I learned ot buff paint, touch up scratches, get interiors cleaned. I eventually learned how to make things look brand new all around. Wife called it polishing a turd. Have to spend time on things that people see the most to maximize potential returns. Use bon ami on the windsheild to get all the sratches and haze out. Armorall all the interior plastic trim. use polish/wax for the paint for wet look. use pie plates with baking soda on them placed in the footwells for a few days to remove smells. Used cars always smell. maybe then switch to fresh ground coffee. could be stale. Let that sit over nite to remove any terribly hard to remove smells.

    I then moved to pickups and vans and targeted the construction guy's. These types of vehicles bring a premium if marketed correctly.

    I never register, inspect or title any vehicle. Whne i purchase it I have the seller sign the title and kindly ask them to not fill in the sale price or sale date. I do ask them for a signed bill of sale though which should include the vin, sale date and actual price. I tow it home, list it for sale same day, prep it the next two nights and then take a picture and update post. I find craigslist to work well. and its free. Being that you never title it you never owned it in the eyes of motor vehicle but the bill of sale covers you for actually owning it. Never a problem in 15 years of doing this. My out if ever questioned would be that I changed my mind and no longer wanted the car.

    I have learned (as most of you know) that proffit is made in the purchase so I buy at the right price. i try to get it well below book value. If people seem to be motivated I low ball the offer 6 out of 10 times they take it. In the end I try to make minimum of 1000 per flip. More if you really master polishing turd:smxF:

    If anyone is doing this and wants specific help...send me an email. be glad to help!
     
  16. 6.0_bull
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    6.0_bull New Contributor

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    Take that same anology but do it with Real estate in the right market of course, and your on your path to being a multi millionaire
     
  17. Runum
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    Runum Platinum Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    Hey Bosco, good ideas but if you get caught doing that in Texas not so good. Over here, in the near future, are going to require dealers to change the titles online the minute they make a retail sale. Texas is a real hound about getting their tax money. Good luck to you though.:cheers:
     
  18. Jito
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    Jito New Contributor

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    Be very careful with this. Many states have a limit of cars you can sell per year for profit and its far less than 10. But good step into the game nonetheless. Dealers licenses are intended to keep margins up by increasing barriers to entrance.
     

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