How I Flip Houses in 6 Steps

Six short modules on exactly how I run a flip, from sourcing the deal to getting paid. I use a real house I'm flipping right now, Putnam Drive, as the example the whole way through.

Watch the video, read the notes, then move to the next module. It's free.

1. Deal Sourcing. Buy it right.
2. Underwriting. Know what it's worth fixed up and what you can pay.
3. Financing. Line up the money and close clean.
4. Rehab. Do the work that sells.
5. Exiting a Project. Price it right and present it well.
6. Get Paid. Count every dollar.

You make your money when you buy. A great rehab can't save a bad purchase price, so most of the work in a flip happens before you ever own the house.

Where deals come from

• Direct to seller. Mail, texting, calls and door knocking to owners who might want out: inherited houses, tired landlords, vacant properties. The most work, the best margins.
• The MLS. Look for listings that have sat a long time, price drops, bad photos, and "as is" in the remarks. Make offers that work for you and expect most to say no.
• Wholesalers. They bring you contracts for a fee. Run your own numbers every time.
• Your network. Agents, contractors, lenders and other investors. Tell everyone what you buy.

What to look for

Houses that are ugly but structurally sound, in areas where fixed-up homes sell. Cosmetic work is predictable. Foundations, full rewires and water problems are where budgets blow up.

It's a volume game. You will look at a lot of houses and make a lot of offers before one makes sense. Track every lead and follow up.

Action step: Pick two lead sources from this list and work them every week for the next 90 days.

Every flip comes down to a few numbers: what it sells for after repairs (the ARV), what the repairs cost, and the most you can pay for it.

1. ARV (after repair value)

Pull sold comps, not listings. Use homes that sold recently, close by, with similar size, beds and baths, and finished condition. If the comps are all over the place, use the lower end.

2. Repairs

Walk the house room by room and write it down: roof, HVAC, plumbing, electric, flooring, paint, kitchen, baths, exterior. Get bids on anything big, then add a contingency for what shows up once the walls are open.

3. Your max offer

A common quick screen is the 70% rule:

It's a filter, not a final answer. Before you sign, build the full deal sheet: purchase and closing costs, rehab plus contingency, holding costs for each month you own it, loan costs, and selling costs. What's left is your profit. If it doesn't justify the risk, walk.

Action step: Pull comps and build a full deal sheet on one house in your area this week, even if you never make an offer.

You don't need all your own money to flip, but you do need to know where every dollar comes from before you go under contract.

Ways to fund a flip

• Cash. Simple and fast, but it ties up your money one deal at a time.
• Hard money and fix and flip lenders. Short-term loans based on the property, often covering part of the purchase and the rehab. Higher rates and points, so put them in your numbers.
• Private lenders. Individuals who lend on your deal, secured by the property with a recorded lien.
• Local banks. Better rates once you have a track record, more paperwork.
• Partners. One brings money, one runs the project. Put every detail in writing.

Know your total cost of money

Add up interest, points, fees and how many months you'll hold. A cheap rate on a slow project can cost more than a higher rate on a fast one. Most lenders want cash from you at closing too, so plan for it.

Getting to the closing table

• Use a title company or attorney. They check the title for liens and problems and handle the money.
• Get title insurance so a problem from the past doesn't become yours.
• Line up insurance on the house before you own it. Your lender will require it.
• Keep your lender moving. Appraisal, draw schedule and paperwork all need to be done in time.
• Read the settlement statement line by line before you sign.

On day one, change the locks, get utilities in your name, and have contractors ready to start. Every day the house sits costs you money.

Action step: Call two lenders and ask exactly what they need from you to fund your next flip, and how much cash you'd bring to closing.

The goal of a flip rehab isn't your dream house. It's a house that sells fast, for top dollar, without overspending.

Must-fixes first

Roof, foundation, water, HVAC, electrical and plumbing. Buyers and their inspectors will find these, so fix them right.

Then the money-makers

Kitchens and baths sell houses. Then floors, paint, lighting and curb appeal. Match the finishes to the neighborhood. Over-improving is money you don't get back.

Run it like a business

• Put the scope, price, timeline and payment schedule in writing.
• Pay in draws for completed work, never a big amount upfront.
• Visit often or get daily photos.
• Handle changes in writing, with a price, before the work is done.
• Track every dollar against the budget.

Action step: Write a room-by-room scope for your next house before you call a single contractor.

You don't get paid until it sells. Plan your exit before you buy, and know what selling costs.

Price it right on day one

Price off sold comps and the current market, not what you hoped to make. A house priced right gets attention in the first week. An overpriced house sits and usually sells for less after price cuts, while you keep paying to hold it.

Presentation

• Professional photos. This is where buyers decide whether to come see it.
• Clean it top to bottom.
• Curb appeal: mulch, trimmed bushes, clean siding, a good front door.
• A walkthrough video for the listing and social media.

Selling costs

Agent commissions, closing costs, any concessions to the buyer, and the holding costs until closing. Put all of it in your numbers from the start.

Action step: On your next deal, write down your list price, your selling costs and your backup plan before you buy.

This is the one everybody wants. If you bought right, funded it smart, fixed it up and sold it well, this is where it pays off.

What you actually make

Your profit is the sale price minus everything: purchase and closing costs, the rehab, loan costs, holding costs, and selling costs. Your final settlement statement shows the payoff to your lender and what's left for you.

Then do it again

• Compare your real numbers to your deal sheet. Where were you off?
• Set money aside for taxes and talk to your CPA.
• Pay your lenders on time, every time. That's how you get funded on the next one.
• Use what you learned to buy the next one better.

If you'd rather put your money to work in deals like this without running them yourself, let's talk.

Start Here

A free course on note investing: what a note is, how it pays you, where to find one and what can go wrong. Ten short modules, start to finish.

Watch the video, read the quick notes, then move to the next module. It's free.

1. The Problem & Solution
2. Become The Bank
3. What Is A Note?
4. How You Get Paid
5. Types of Notes
6. Variables of a Note
7. Buying The Right Note
8. Where To Buy Notes
9. The Risks Involved
10. 4 Rules of a Good Note

Want to learn how I flip houses too? Take the Real Estate Investing course.

Most savings sit in places that barely keep up with rising prices. Stocks can do better, but you ride every up and down.

Notes are another option. You earn from a loan backed by real estate, and the borrower's payments come to you. This video lays out the problem and how notes help solve it.

Banks make money by lending it out and collecting payments with interest. When you own a note, you step into the bank's shoes.

The borrower keeps the house and makes the payments. You collect them.

A note is the borrower's written promise to pay back a loan. It comes with a mortgage or deed of trust that ties the loan to the property.

Whoever owns the note owns the right to the payments, and the property is what backs it up.

There's more than one way a note pays you. This video walks through each one.

• Monthly payments. Principal and interest, every month.
• Payoff. The borrower sells or refinances and pays off the balance.
• When it goes bad. What happens if the borrower stops paying.

Not every note is the same. Some are paying on time, some are not. Some are in first position on the property, some are behind another loan.

Knowing the type tells you a lot about the risk and the work involved before you ever make an offer.

A handful of numbers decide what a note is worth to you: the balance, the interest rate, the payment, the time left on the loan, and what you pay for it.

Change one and your return changes. This video breaks down how they work together.

Just like with houses, you make your money when you buy. A good note at the wrong price is still a bad deal.

This video covers what to look at before you buy, so you know what you're getting into.

You can't pick up notes at the store. This video covers where they actually come from and how to start finding them.

Every investment has risk, and notes are no different. Borrowers can stop paying, property values can move, and paperwork can have problems.

This video goes over the risks so you can go in with your eyes open.

Four rules to check before you buy any note. Use them as a filter on every deal you look at.