Reader Mail: Getting started real estate investing with foreclosures

by Avi
(Illinois)

I have been checking out your website for past three months as I am getting into flipping for a living in Rockford Il. First I want to thank you for creating such a nice website and sharing your experience with others. All your work is higly professional and no wonder your house sells fast. Now for the first time flipper do you have any advise e.g. do not hire a general contractor and rather get it done acting as a general contractor. It seems you are finding good deals with various things e.g carpets etc. How does one find good deals to make sure that the profit margin stays intact.Lastly do you have any suggestion about the chronology of work in a first flip so that the project goes smoothly without waiting for any downtime due to ill planned project. Thanks and I appreciate your feedback.

Regards
Avi


LM Says: Avi, thanks for the kind words. I am very glad you find some of the information here useful.

This could be a very long answer because I have learned so much in the time I have been flipping. The question about hiring a GC vs. doing it yourself really depends on three things: 1) Your time and availability, 2) The scope of your project (simple vs. complicated rehab) and 3) how comfortable you feel managing a rehab project.

For my first flip (http://www.wealth-steps.com/flip-this-house.html) I hired a GC because I did not have the time to oversee the project, did not have the contractors and it was a significant amount of work to do. I think hiring the GC was the right call. Sure, it cost me more but in the end the job was first class and I still walked away with a good profit. Without a GC I am not sure how I would have fared on that job. For my subsequent flips I now had extensive contractor recommendations, had more time and felt more comfortable taking on a whole project myself.

Finding deals on labor and materials comes down to two things: asking referrals from other investors and shopping around a lot! I have met a lot of investors and if there is something they all have in common is they are all cheap ;-) So my best contractors so far have been found by asking around. When you are talking with a new contractor tell them what you do, who referred you to them and that if they do good work you will call them again. Once they understand where you are coming from I have found that they now give you the "other" set of pricing, the one that is not advertised. It works...

Also, understand that they might not be super cheap on the first job you give them but if you call them back for another one and then another one then they will definitely work with you.

The scheduling of a rehab is very important. If you mess it up it can cost you time and money. If you nail it then your rehab can be smooth sailing (mostly) and get done in the least amount of time. Check out this page: http://www.wealth-steps.com/foreclosure-investor.html to give you an idea of how I do it. But what you really want to do is go get yourself a copy of the book Flip by Rick Villani. That book is essential for any flipper and it goes into detail on how to schedule your contractors. I have created my project management spreadsheets based on this book.

Finally, there is no substitute for experience. Just be patient, educate yourself, do a rehab, learn from it and do it all over again...You'll get it.

Thanks,

LM

P.S. - you also mentioned you are going to be doing this full time.I got a lot more suggestions regarding that. Let me know if you want more suggestions.



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Thanks
by: Anonymous

Thanks LM for the help here to answer my questions. I appreciate it very much. Your advise was quite helpful. I will be in touch should I need more direction.
Regards

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More advise is very welcome
by: Avi

Hi Luis,
I came back to check if anything else is going on at your end with new project. I would very much like to have your advise in flipping as I am into this as full time. I am still looking to get a house to do a flip. The first house I choose was 72 k. However when I got a quote from a GC he quoted 55 k. This is just ridiculous. This house needed work no doubt. However that figure is just too exorbitant for me to make any money in the location and the type of house. So I am thinking of doing a flip myself now acting as my own GC. Since this house is a bit too much for first ime flip on my own I am looking for lesser value and lesser complicated project now. Is there any software in the market that will give me ball park estimate of project by adding the various data? Also I do not yet know anybody in my area who will recommend good contractors for various jobs. How would one get that. Finally if you have more advise for me it will be so helpful. Also good luck to your house number 6 sell.

LM Says: Avi, there is a lot to consider here so I have moved the response to your question here.



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