You've started attending your local REI group and have talked with a few investors there, and you keep hearing about JV deals. So, what exactly is a JV deal?
JV means Joint Venture, and they can be structured in numerous ways. I'm going to explain how the majority of my JV deals work, and you can adjust the variables from there.
Since starting back in the business after the recession, many of my deals are JV deals.
Before the recession, I had much of my own money and lines of credit that I used to purchase and rehab my houses.
After the recession, I didn't have access to those funds anymore.
So, I had to figure out new ways to fund my deals. Hard money has been one way; however, JV deals have been another great way for me.
How it works for me is, my partner will put up all the money, to purchase, rehab, holding costs, etc. and then I will find the property, renovate it and handle the selling.
Then once the property is sold, we split the...
I’m back to one of the topics I’ve talked about in a few areas and that is the house flipping shows.
Like I have said in the past, I love the house flipping shows, but you always must be a little cautious in believing everything you hear!
The reason I’m back this time around is I just saw a show this past week that I had to write about. It was one of those shows where the flipper must yell and complain about everyone and everything.
Plus, they always show up in a $200,000 car to show you just how rich they are!
Let me give you the numbers they gave you in the beginning of the show.
$97,000 Total All In
$119,000 Sales Price
First off, the numbers are ridiculous. Here again they don’t consider Realtors commission or closing costs. So, they need to take probably $10,000 off that number which will give them a profit of $12,000.
There are literally hundreds of areas that I would buy in and around Birmingham.
I like to tell people; I will buy in what I call "retail" neighborhoods.
That is where the majority of homes sold are to the retail buyer. Not a rental area, in other words.
So many people get hung up on the "hot" areas and think that is the best place to flip. It can be, but many times I've found it to get too competitive, and it is actually harder!
The other factor that will determine the area is what funds you have available to you.
You may know an incredible area near you where the homes will sell for $300,000 when renovated, but you are only approved for $150,000. That's not gonna work.
I tell new investors I think it is wise to stay at the lower end of the housing market, especially for your first few flips. That price point will vary depending on where you live.
In my area, I love the homes selling...
There are many factors you need to consider when looking for a property to flip. You want to be sure you are in a "retail" neighborhood, meaning most homes are sold to owner-occupants and not rental properties.
Also, the prices of homes are another crucial factor.
You might find a great neighborhood, but the price of the houses is above the amount of money you have access to. So, while it may be a great neighborhood, it's not a great neighborhood for you.
Another factor that I think is important, especially for new house flippers, is the age of the home. I know the older historic homes are beautiful and can be stunning when renovated, but they can be massive projects to tackle.
Not only can they be extremely costly, but they can also be a much more complicated renovation.
If they haven't had major prior renovations, they may need total re-wiring and all new plumbing. You'll possibly run into older materials like knob and tube wiring, galvanized pipes, cast iron...
If you are new to the house flipping scene, you may have heard people talking about comparables. If you've been doing it for a while, you should be pretty familiar with the term.
However, you may not fully understand it. Hopefully, I'm about to give you a better understanding of what comparable means.
(Of a person or thing) able to be likened to another, similar
Of equivalent quality; worthy of comparison
Being so similar as to appear the same
So, you get the idea, things that are "so similar as to appear the same." In the house flipping arena, we're talking about other houses in comparison to ours. I could probably teach a whole class on the subject, but for now, I want to touch on some key points.
Being an appraiser, this is something I deal with daily and has helped me tremendously in my house flipping business.
The better you get at recognizing comparable sales, the better the house flipper you will be!
Let's go over...
So, let’s talk about searching for your first flip. There are so many things to think about – what do I even need to be looking for? What non-physical things do I need to consider? Who do I talk to? I feel like we’re about to begin skipping down the Yellow Brick Road!
A few things to consider when you begin looking for a property:
Years ago, when I was first starting to flip houses on a larger scale, I had a partner tell me money would not be an issue.
Now, I probably did have the wrong mindset back then, but I told him money was always a problem! Well, I'm here to tell you he was right, and I was dead wrong.
Over the years, money really has been one of the easier parts of the equation. There are so many options. You can work with local banks, or maybe you have friends or family that would want to invest, others may want to do joint venture deals possibly.
The other way that I want to talk about today is hard money lending. This way of financing projects is sometimes the easiest way for new investors to get started.
Basically, you have an individual or company that lends money to others for purchasing and renovating properties. The rates they charge are going to be much higher than a bank, but if the bank is not an option, then hard money may be a good alternative.
We've all seen the house flipping shows and who out there doesn't talk about Chip and Joanna at some point! We do at our house. I honestly am a fan of many of them, but a few things I have to say about them.
Don't believe everything you hear! Below is an excerpt from my book about to come out. This sums up my introduction to these shows years ago.
"Speaking of TV shows - years ago, when all the flipping shows started, there was one based in South Carolina, I believe. The host was obnoxious; he screamed, yelled, and thought he was the most incredible renovator in the world.
(Can you tell I didn't care for him?) Anyway, he walked into this home he wanted to buy on a Friday. He said something along the lines of, "Let's buy it and close tomorrow. I want to renovate it next week and have an open house the following Sunday."
If that wasn't stupid enough, he then verbally went through the list of renovations he wanted to complete. OMG! This guy wanted to tear out, replace, sand, and...