Finding and training the right agent can take your house flipping business to an entire new level! Today we’re going to teach you how its done!
There are many ways to go about purchasing a potential flip property.
In this post I’m going to teach you how you can start working with Real Estate Agents so that you will have access to, and be able to buy, more houses to eventually flip.
Through this method you can leverage the knowledge and abilities of someone else as you continue to learn how to analyze deals and become familiar with your “farm area”. Then as you begin to integrate direct marketing to sellers, you will have a better idea of what you are doing and you can be more effective with your marketing budget.The reason I wanted to start by teaching you how you can work with Real Estate Agents to buy houses, is because I think it will be the quickest way for you to get your feet wet and something you can start taking action on right away. Plus it costs little to no money!
Plus, you will then have developed a great relationship with an agent who will be a part of your “power team” (more on this later) and whose opinion you trust. Anytime you have a question about a certain area or property you can contact them.
Without a doubt, this will come in handy when you are contacted about a house and need to make a quick decision. Having that additional guidance to help you come up with your ARV and calculate your offer can be invaluable when you are in a “crunch” situation!
- How to find a good Real Estate Agent
I intentionally put “good” instead of “great” because the honest truth is, if you start looking for the top agent in a given market, chances are they are going to be so busy working with other clients, they can’t give you the time and attention you need when first getting started. On the other hand, the last thing you want to do is start out by working with Uncle Phil, who just became a realtor last week and has no idea what he is doing!
Before long your “good” agent will become “great” through the relationship you have developed as you learn and grow together. In fact, with time, you and your agent may become top producers in your given area. It’s happened more than once with our agents and it can happen for you as well.
- Where to find an agent?
There are a lot of places you can find a good real estate agent.
When calling a brokerage, be sure to ask to speak to agents who are:
- currently active in listing and selling properties,
- have at least a couple years of experience,
- work in your farm area,
- and can assist you in making offers on investment properties.
The great thing about working with these agents is that they usually have a better understanding of investing and may be easier to work with in that regard.
- Educating your agent
So, now that you have found an agent to work with the next step is to make sure they understand what you are looking for.
Realtor Quiz: Distressed or Rehabbed?
You need to make sure they understand the difference between “distressed” or wholesale value and “retail” or rehabbed value, also known as ARV (After Repaired Value). Otherwise your formula will not work because you are working with the wrong numbers from the get-go.
Finding an agent with previous "house-flipping" experience, such as Georgia Leon, can be very beneficial in securing the promise that the job will be done right the first time.
- Making offers with an agent
Now that your agent understands what you’re looking for and can help you find potential investment properties, it is time to start making some offers!
Ask them to send you a handful of distressed properties in need of some work or upgrades. Just get a few to start.
Start with the first property and ask them what they think it will sell for once it has been fully repaired, upgraded and in “turn key” condition. Have them show you the comps they used to come up with that value to ensure they are truly retail comps, comparable to your subject property both in size, age and location.
Then plug in your formula of (ARV x 70%) – Repairs to come up with your offer price. Once you’ve done that it’s time to make your first offer!
Your agent will be able to help you with this. They will probably use the Standard Realtor Contract for your area and will tell you what information they need. Things like the name or entity you will be using for your offer, how you will be financing the property and how many days you intend to take to close.
When you are first getting started I recommend doing a 21 day close. This is a shorter than the standard 30 – 45 days, which will help give you an advantage, but it still gives you plenty of time to get your ducks in a row in case your offer is accepted.
They may also want to know about other contingencies, such as an inspection period. In California (and I believe other states as well) a standard inspection period is 17 days, but you might want to make this 10 days to give you a slight advantage (but still have enough time to do some due diligence on the property).
There will be other contingencies such as financing, appraisals, etc., which you can either waive or keep the standard agreement as is. You may consider removing them down the road as you gain more experience and confidence. Your agent can also give you some advice in this area.
- Show me the money?
Two more items you will probably need when making offers on homes listed on the MLS are the EMD (Earnest Money Deposit) and POF (Proof of Funds) or a loan pre-qualification letter.
These two items are probably the main hang-ups for new investors, which is why having a Real estate agent is key, to have access to the MLS, and guide you through the process with ease.
The first one is an easy fix. An EMD is really just a copy of a check written out to the escrow company. In fact, you don’t even need to give it to anyone when you make your offer. You just need to give them a copy of it!
Now, keep in mind that several things would have to happen for you to lose that deposit.
First, you would actually have to get your offer accepted before they even ask for the money.
Sometimes an inspection can help you out
Now, I said “usually” because there is a chance that you may go past your inspection and contingency period and they will keep your deposit. Just be sure to make your final decisions before the inspection period!
I know that one of the main reasons people do not take action in this business is FEAR, and I don’t want the fear of losing your deposit to get in your way of making offers, so my hope is that understanding there is still an “out” if you absolutely need it, will help you take action!
- Proof of funds
The second, probably “bigger” obstacle for most people is showing proof of funds.
Just to be clear, proof of funds is demonstrating that you have the money available to actually buy the house. And there are several ways you can go about providing this, and much will be explained by your Real Estate Agent.
- Making Progress
So, now you have found your agent and are making offers.
It can be a little discouraging at first since you will definitely have some competition on the MLS listings, but try to think of this as a numbers game, or an educational process. I mean, people pay thousands of dollars and countless hours going to school or attending seminars, and you are getting a hands-on educational experience for next to nothing, and it will take much less time!
I would suggest that, instead of having a goal of getting X number of offers accepted, start out by just trying to make one offer a day for 25 days. I promise that by the end of that 25 day period you will have learned a ton, and will really know the process like the back of your hand.
You can never truly understand this business unless you start taking action.
Thank You Justin Williams at House Flipping HQ for providing this information!
Some information has been slightly changed. This is not intended to solicit, it is provided for informational purposes only. Here at Synergy, we are always making new connections with fellow agents, clients, and investor's everyday! We maintain a respectable business relationships with a genuine concern for YOU! We have expertise in Retail Real Estate, Rehab Investing, Flipping, Off-Market potentials, and Land. We welcome your business, and aim for the highest satisfaction when meeting your needs.
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