Our #1 Tip
KNOW your NUMBERS!
There are SO many moving pieces and important numbers when it comes to Real Estate Investing, especially when you are renovating a property to sell for a profit or simply put, when buying a fix and flip.
How do we know?
It’s because knowing our numbers is our livelihood! We’ve gotten it down to a science. It’s the reason we don’t have to work for someone else at a full time job. It’s how we were able to buy our dream home on 42 acres, and why we get to spend time frolicking with our horses and playing with our nieces and nephews while others are stuck in the 9-5 + overtime work grind.
Knowing your numbers will take time and research, but with practice, it becomes second nature! REMEMBER if you skip this step or get this wrong instead of making money you could be losing money and wasting valuable time!
To know your numbers, you need to work backwards.
- First, start by learning how much the home will be worth after the renovation. We call this the ARV- the After Repair Value. This is found by researching the sales of COMPARABLE homes NEARBY. You don’t have to be a realtor or an appraiser to get the ARV. Pulling comps typically takes us 15 minutes. It’s easy, but ONLY if you know exactly what you are looking for.
- Next, you have to analyze how much the renovation is going to cost. In the end this house has to be safe, pass home lender inspections, and actually look like it is worth the price tag in order to sell. In this step you have to estimate all of your expenses for fixing up the property (utilities, permits, holding costs, lawn care, maintenance, house keeping, materials & labor, etc…). In the beginning, these numbers can accurately be estimated with a little research, hiring an inspector and by obtaining contractor quotes, but as you learn and graduate to a Flippin Expert, you’ll practically know these numbers by heart and you’ll probably be able to estimate the cost just by walking through the house. *Expert Tip* Whatever you think your renovation will cost be sure to add an extra 10-15% buffer in case unexpected expenses arise.
- Then, selling the home to your buyers will have additional costs. MLS listing pictures, broker/realtor fees, closing costs, surveys, inspection repairs, and potentially more. You need to research these numbers, too.
- Finally, you are ready for the MOST important step: Finding your initial purchase price. This is where so many real estate investors, wholesalers, and flippers get it wrong! If you don’t know the details mentioned above you can’t accurately determine the purchase price you need in order to make a profit. You’ll have to take your ARV and subtract all of the costs associated with the renovation, and resale as mentioned above. BUT WAIT! You aren’t done yet. DON’T forget that you have to make money to make this investment worthwhile. The profit, that you need to make all of the work worthwhile, has to be taken out of the initial purchase price too! In summary- take the ARV MINUS everything in Step 2, 3 and your profit needed, to know the maximum price you can afford to purchase your fix and flip!
It sounds like a lot but don’t worry. It’s easy when you break it down piece by piece. PLUS you are not in it alone, we are devoted to helping YOU master your numbers!
To SIGN up for FREE Training Videos- including how to find the ARV, and obtain funding for your next fix and flip click here.
We also have in depth training of these steps combined with the worksheets, tools, and the exact formula we use in the Flippin Experts Online Training Course Available NOW. Enroll Here