Since way back, house flipping has not only been a big part of the entertainment industry. It has also garnered a large profit for real estate investors. Numerous TV shows have proven just how much one can add value to a piece of property. However, how can it be done remotely?
Virtual real estate coach and investor Lauren Hardy explains more about this creative process. This episode is brimming with tips on getting started on out-of-state house flipping. Your location is not anywhere near to being a problem when engaging in the business of virtual buying, improving, and closing good deals.
Virtual House Flipping – How to Flip Houses in Any Market in the Country
We are going to switch gears. Instead of talking about wholesaling virtually, which is what I love to talk about, we’re going to talk about flipping houses virtually. After watching episode after episode of HGTV’s Flip or Flop, now you want to flip houses. You are excited. You see the big checks that they make at the end of the episode and not only that. You see the creative side of real estate investing when you get to be creative and pick out fun finishes, tile and all that good stuff.
Isn’t it fun to watch the big reveal at the end? It is, honestly. It’s super satisfying. Not that wholesaling isn’t satisfying, but there is this creative element in buying the property yourself, improving it and adding value to the neighborhood in the community. There’s something about it that you can’t replace. For anybody who might be interested in house flipping, I urge you to do it. The problem is some areas are easier to flip houses than others.
Maybe you live in an area where the houses are super highly-priced like me. I live in Orange County, California. The average house price here is $900,000. Maybe you live in LA, Seattle or Washington, DC area. Maybe the area you live in is saturated. Everyone is trying to be a house flipper. Maybe you live in an area where houses don’t have that much value, so you can’t add any more to get any more out. Maybe you don’t even want to be strapped down to a certain area.
Maybe you want to be able to move and travel the world but you know that you have to pick one market area to work or maybe a couple. What do you do? You’ve got the wrong assumption. You are assuming that you have to be there physically. I get the reason why. The reason you assume it is because, on all those TV shows, they are driving to the property, walking in and touching the walls. You’re assuming that you need to be physically present.
You need to be that person doing that to be able to pull this off. Plenty of investors flip houses out-of-state, me included. My goal with this episode is to share my perspective on out-of-state flipping so you can change yours. Why would you even want to listen to this episode? Why do you even want to consider house flipping? I’m going to tell you why because with certain deals, when you wholesale them, you are leaving a lot of money on the table, sometimes three times as much.
Sometimes, a quick nickel is better than a slow dime.
Why would you not want to make $30,000 when all you have to do is put some teams and processes in place? Imagine this. Your wholesale fee would be $10,000. If you took some extra time, you took eight weeks and you fixed the property up, you can make $30,000. What is a better outcome there? In this marketplace with so much access to properties and people going after the same deals as you, it makes a lot of sense to have more tools. You need to figure out how to squeeze the juice out of every deal because deals are getting harder to come by.
House flipping is a skill that you need to learn, even if you’re virtual. In this episode, I’m going to share with you a few things. I’m going to talk about the key members that you need on your team when you’re virtual, the inspection process and what you need to do to make sure you’re getting a good deal. I’m going to give you a little secret or hack. I have to always make sure that the deal I’m buying is good. Before I get into this episode, if you love this episode and you think somebody else will benefit, make sure that you share this episode with anyone who you think might benefit.
Let’s get into it. Who are the key members of your team that you need? Number one is you’re going to need a good general contractor. You want a general contractor that you can trust. Try to get somebody that was referred to you. Your GC is going to handle the entire construction process. You want to make sure you choose wisely. In my experience, sometimes you have to go through a few general contractors before you find that perfect one.
Number two, the next person you need is some boots on the ground. I call this person a runner. The runner helps to be my eyes in the sky. I’ll have my runner go to the properties every single week and take photos to make sure that there’s forward progress and that you can see that work is being done, things are being accomplished and we are on schedule. You can have that runner take videos and photos for you and send those to you so you can verify that what the general contractor is saying they’re doing is being done.
Another important member of the team is you need a local realtor. I love having a realtor on my side but I want to make sure that I have a realtor that I can trust. I want a realtor who’s going to be realistic with me about my price expectation. I want to make sure that the realtor gives me an after repair value that seems accurate. Realtors have a funny way of inflating the sale price. They always tend to say that the property is going to sell for more than it usually does.
They do that because they want your business. They want to get you excited about selling the home. I don’t know if they teach that in realtor school or something but that’s what they do. I want to find a realtor that’s not going to play that game with me because I want to know before I buy this property if the realtor sees value in it or not. The realtor is somebody that I go to when I first get the property under contract and ask them, “What do you think this thing would sell for? What do you think? Is this in a good neighborhood? Is it not? Tell me. Do you think we should take this one down?”
I have been in this business long enough to think for myself. I don’t let the realtor convince me to do something I don’t want to do. If there is something good about this contract I have where it might make me three times as much if I flip it myself, then I have the realtor verify my thinking. A good realtor will be honest with you and tell you, “You’re wrong,” and tell you why. We respect that. If you have a realtor say, “I wouldn’t do this and touch this one,” that’s a keeper.
Here’s the next team member. This is crucial. I made this mistake the first few times I flipped houses out-of-state. After I got burned by a few contractors, I realized I needed this key member of my team. This person needs to not be me because I do a bad job at this. I’ve fired myself from this role. I got a project manager. A project manager, for me, is somebody that works project by project. They get paid by the project. Their job is to manage the general contractor and verify that work has been done.
They will not let me pay that general contractor any installment payments until the work has been done. They will let me know how much I should pay for the next installment. General contractors, especially the shady ones, will get you to make big installment payments. If you get a bad one, they will run off with your money. I had that happen. When I didn’t have enough experience, I ran into a shady general contractor. He said that he needed $13,000 to get the project started to get all the materials.
I didn’t have a good project manager working with me so I trusted him. He ran off with my $13,000 and didn’t do anything to the property. I learned never to give that much money upfront. If it’s to buy materials, I’m going to buy the materials myself. The project manager helps. You want to get a project manager who has experience in construction. They know the questions to ask and how to vet out GCs. Part of my project manager’s job is to help me find a GC and ask those important questions.
The best way to make sure you got something good is to weigh things out.
Now that you have the key members of your team, let’s go into the inspection process. I prefer to inspect the house at least two times, if not more. The first time I go through is to take photos and a video walkthrough. I prefer to get my realtor in at that appointment. The purpose of this is I want to know what issues does the house has. Do I need to send in any specialist, a roof guy or an engineer for the foundation to do a foundation inspection?
I get my idea of what the house looks like, what it needs ad who else I need to walk through that home in that initial inspection. In the next inspection, I will walk any potential buyers if I’ve marketed the property in a wholesale and also my general contractor or maybe even three of them to get three bids. I want to know what the construction cost is going to be. This is before I close escrow on the house. I do this as part of my inspection period. We call this due diligence.
This leads me to the last step. Part of my due diligence is to make sure I’ve got a good deal. Here’s the best way to make sure you got something good because I want to have that warm and fuzzy feeling before I close on a property. I will market this property to buyers as if I was going to wholesale it. I weighed out at that point what it would be like if I wholesaled it versus flipped it. At this point, I’ve used my flip deal analyzer. I’ve got an anticipated net profit if I were to flip it in my head.
I’m going to go and see what I would get if I wholesaled it and weigh that out. Sometimes a quick nickel is better than a slow dime. Maybe you find out that if you wholesale, you would get $15,000 but if you flipped it, you would get $20,000. Would you rather go through the risk of flipping it, it going wrong and you do not get the ARV you thought, or your contractor runs off with your money and something happens? In that situation, I would go for the wholesale and sell the home off. If it was something like, “If I flipped it, I got $30,000,” it’s a no-brainer. I would flip the house.
There’s also this other scenario, “What if nobody bites? What if you market the property and nobody is interested?” Let me tell you this happened to me. I made such an amateur mistake. I couldn’t believe I had done it. I forgot to look at the Google Earth image of the home. I’m virtual and out-of-state, so I couldn’t drive to the property. Usually, I’ll go on Google Earth and drive up and down my street, virtually using Google Earth. I forgot to do that this time.
If I did, I would have noticed that the property was wedged between two commercial buildings. It’s a total amateur mistake. All other things considered, this property was a slam dunk. I had it for such a good price. I had model match comparables that went for double the amount I got the home for. It would have been an easy $30,000 net profit, if not more, but it was functionally obsolete. The property was so poorly located. It would have been very hard to sell.
I have a rule. I will never buy anything that is next to commercial buildings unless that is not characteristic of the area. I will not buy anything like that. I don’t like functional obsolescence. Had I not marketed that deal and noticed that no buyers were interested in it, I might have bought that deal. I would have been sorely disappointed when I realized that it was right next to an office building. I recommend always doing that because it might make sense to wholesale.
You want to have that option in your back pocket. It’s also a checks and balances system to make sure that you are getting a good deal. That’s it. As far as my pieces of advice for flipping houses virtually, can it be done? Yes. Is it done all the time? Absolutely. Should you learn how to do it? Yes. You need all the tools in your toolbox. Wholesaling isn’t enough. You want to expand. Don’t you want to grow? You want to build your wealth in real estate.
To do that, you need to learn how to take a property down, add value, refinance it, keep it as a rental or sell it off and put more cash in the bank than if you were to wholesale it. I hope that I have given you some good advice. If you found this helpful, make sure you share it with a friend. If you want to learn how to find these slam dunk virtual deals, make sure you check out www.VirtualInvestingMastery.com because I can help you do that. Thank you so much for reading. I will see you next time.
- Be sure to join the Wholesaling Inc Facebook group
About Lauren Hardy
Lauren Hardy is a Virtual Investing expert and Real Estate influencer who owns multiple companies in the real estate industry including real estate investment, coaching, and software companies. She is also a Wholesaling Inc coach and co-host of the Wholesaling Inc Podcast.
Her experience in the last decade has been focused on real estate investing and creating products and services to serve the real estate investing community. If you are interested in investing in real estate virtually, house flipping, or virtual landlording, Lauren’s your girl.