Thought about flipping in Denver but not sure where to start or if you can be successful in a competitive and changing marketplace? Our ELEVATE Your Flip educational series will give you the real time keys to success from local investment experts in this seven part content series.
The guest for this course is Derek Marlin. He is the Founder of ELEVATION which specializes in property re-development (Fix & Flip), consulting, wholesaling, and a unique Partnership Flip system.
This first episode covers:
- Flipping reality check
- Investor success factors
- Getting your financial house in order
- Realistic expectations for all experience levels
This post is part of the ELEVATE Your Flip Course. The course gives you an introduction into fix and flipping properties in Denver.
Three Learning Options:
- Listen to episode “#127: Flip #1 – Denver Flipping Blueprint” on the Denver Real Estate Investing Podcast
- Watch the YouTube video at the bottom of the page.
- Read the blog post.
Flipping Reality Check
In order to become a successful flipper, you must first understand that flipping is not a passive investment. It takes hard work and fits best for those who view it as a business even if you don’t plan to make this a full time endeavor.
Investor Success Factors
Successful flippers are organized, know what their goals are and are realistic in their expectations. You will need to be actively involved in the flipping process which takes organization.
It’s important to consider and identify your unique strengths and what you bring to the table. Do you have contracting experience? Do you have a real estate license? These are helpful skills but not necessary for everyone.
The next question to ask yourself is what do you want to get out of this experience? Do you want to continue to work at your current job and use flipping houses to develop streams of income? Is your end goal to put money in the market, take a vacation, save for your kids’ college? You will want to identify your short term and long term goals as well as incremental goals. Defining your goals upfront allows you to set expectations based on these goals.
Some other questions to consider are:
- What time do you have available to commit to flipping?
- What is a “good deal” for you? Is $10,000 profit per flip a good deal, or do you need $20,000+ to feel like your flip was a success?
- What lifestyle changes are you willing to make today to decrease your expenses in order to provide more of a financial cushion?
Getting Your Financial House in Order
This involves what we call building a financial runway. In other words, you want to financially set yourself up for success. You will want to get your personal financial house in order which involves the following;
- Paying down any consumer debt you have. A good goal to have is zero or low personal credit debt and other non mortgage debt.
- Build up a personal emergency fund. We recommend having 6 months living expenses in this fund held in a separate account.
- Get buy-in from your spouse/partner. Your significant other needs to be on board!
- Determine what lifestyle cuts you are willing to make immediately so the flipping process is more comfortable and its financial demands more tolerable.
You will also need to get your business financial house in order. This involves:
- Setting up an LLC
- Getting a separate business checking account
- Building up a reserve so you have enough for 10% down and 3 months worth of rehab expenses in the account
- Secure funding for your flip purchase
There are multiple ways to fund your flip deal. Here are a few:
- All cash
- Business line of credit using your own assets
- Home equity line of credit – A HELOC is especially useful to fund the rehab component.
- Hard money lender – You will need to get 100% prequalified based on their guidelines.
- Private lender
- Business credit card – Contact with the bank that issued your personal credit card and get a separate one for your business
For the most part, lenders have very similar terms, so the relationship becomes important in our opinion. We have found it’s better to work with someone local who you can establish a relationship with. You are more likely to get approved, and when you do find a home and need to move quickly, that local lender is more likely to respond quickly because they understand the market and already know you. National lenders are a good option as you grow your business or move into other markets.
Realistic Expectations For All Experience Levels
In order to have realistic expectations, a buyer needs to be aware of current market conditions. In Q4 2019, we are seeing the best flipping opportunities in these categories and price ranges:
- Condo/townhome flip
- 4-6 week timeline
- 15K net profit (25-30K once gain experience and have systems in place)
- Lending: hard money
- Purchase price 150K to 300K, selling for 250K to 400K
- Single Family (SF) flip
- Around 2,000 square feet, 3-4 bedroom, 2-3 bath
- Expect rehab costs in the 40-70K range
- 3-4 months to do rehab
- 25-30k net profit (40-50k and only 2-3 months rehab time once gain experience and have systems in place)
- Purchase price high 200s to high 300s, selling for under 500K
That does it for the first episode in our seven part series. The next one will cover Market Overview and Deal Analysis.
Go to the Denver Fix and Flip Investing Consultation page to learn and more and schedule a call.
Webinar recording – Watch it here or listen to the podcast.