House Flipping 101: Beginner (Step by Step Guide)

Well what's going on wealth builders Ryan Penaed here today I am going to give you my most comprehensive guide on how to flip a house we're going to go through every step of the process all the way from choosing your real estate market to finding a deal to finding the money for the deal to eventually getting it fixed up and sold for profit this is going to go in depth so make sure you get your pen make sure you get a paper because you're going to know everything you need to know from eight to Z on flipping houses if you're new to my channel and you have no idea who I am my flipped over 500 homes in my career we currently have over 550 rental units under management I own multiple businesses doing seven and eight figures so I've done a lot in both the investor and entrepreneur space so when I teach you these different concepts it's not based on theory it's based on what I've been doing you know basically my entire adult life so that being said get that notebook ready and let's hop into this masterclass so flipping 101 okay let's go into step one of flipping houses in the first step that you've got to take well before doing anything else is simply choosing your market okay you've got to pick where the heck are you going to flip houses now when you come to flipping a lot of people ask me Ryan you know should I flip in my backyard or should I try and go to a different market because you know my market is either competitive or it's expensive or it's small or whatever else so I'm going to give you a couple of things that you need to look for when choosing a market okay first thing that I like to look for when choosing a market is population now obviously if you have a bigger population you're going to have more opportunity you know I'm here in Las Vegas where you know we've got over two million people so there's a lot opportunity there's a lot of houses on the other hand I own real estate in Big Bear California where the population is only 5,000 people there's definitely less houses for sale there's less opportunity doesn't mean you can't make money I've actually made millions of dollars in Big Bear as well but if I was going to open up a full-time operation and only do Big Bear it'd be really hard to hit my goals right having a bigger market like Las Vegas um definitely is better so um for me I would say at like a minimum you know you want to really look for population that's got over a hundred thousand I mean obviously if you're over that and you're at call it a million you're gonna have way more opportunity so um don't look at these markets like there's just more competition because there's more people look at it like yeah there's more houses there's more sellers that you know I can make a deal with and help and so um I would prefer more population over less okay when it's all said and done so you know population is definitely a factor okay second thing to look at is the inventory all right so you hear this word a lot when it comes to real estate inventory what the heck does inventory means well I'll tell you okay inventory is very easy to calculate all you do is take the active number of homes this would be everything that's currently listed for sale and divide it by the last 30 days sold all right so you take the active homes for sale divided by the last 30 days sold now let's just say for example a market has 6,000 active homes all right and then let's just say in the last 30 days 2000 have sold well that would come out to three now what does this three represent the three simply represents how many months of supply there are so in this case we would have three months of inventory and the reason that this calculation works is that in the last 30 days 2000 have sold so basically what we're saying is if we continue selling 2000 per month the inventory will be gone in three months because there's only 6,000 homes available so what do you do with this information well this gives you an idea of what is actually a good market to flip in okay so here's what you need to know anything from you know one to two months is a seller's market okay that means if you list a property there's not a lot of inventory you're probably going to get top dollar prices are probably on the way up just because of simple supply demand when there's less supply and you know and there's just equal demand prices are going up all right now right now Vegas where I'm at at the very moment of this video we have like one and a half months of inventory so we're in a seller's market and you know when COVID happened and prices were exploding it was because the inventory was super low we had less than a month of supply here in Las Vegas and that's why we had the crazy price appreciation now three to four months of supply is basically a neutral market all right so it's very neutral you know it's not a buyers it's not a seller's market you know it's very fair playing ground right anything five plus months is a buyers market all right now this means that there's a lot of inventory buyers are the ones in control they get to call the shots they get to choose everything so you know when you're flipping houses you don't want to be in a buyers market you would much rather be in a sellers market because it's easier to sell your home now you might be saying well Ryan couldn't you you know get more deals since there's more inventory sure you can definitely win in any market I don't want to say you cannot win you know in any of these markets I have flipped houses in all of these markets in fact you know when I first got started in real estate back in 2010 we had like nine months of inventory in Las Vegas this was 2010 right after the recession so crazy supply all these foreclosures on the market so it was really difficult as a as a realtor because there's so many houses out there and there wasn't a lot of buyers obviously that's why there was so much supply but you know as time went on you know I started flipping and you know three to four month territory and then when markets got hot we flipped in one to two months and then even when they raised interest rates you know we we dipped into the five plus territory here in Las Vegas so I can tell you from experience it's always a lot better to flip in a sellers market truthfully and you know I don't mind flipping in a neutral market and when it's a buyers market I really try to back off and only get the best of the best deals because you know you're gonna be sitting on your property for a while it's harder to sell it okay so inventory plays a really big role in picking your markets also you know what you need to know is just your you know let's just call it boots on the ground okay so you know if you're doing it locally you're gonna have your own boots on the ground you're the person you're familiar with the area so locals always going to be great if you're going virtual okay because you don't like your local market for whatever reason then you need to figure out man who is going to be the person to help me flip because man flipping a house virtually if you don't have anyone that you trust on the ground is gonna be really hard the only reason I've been able to do in big bears because I have a lot of infrastructure there with you know people that I trust who can go check on these properties contractors and everything else so you know picking a market will be dictated by you know the boots on the ground maybe you move to a place like California you don't want to flip there and then you know you decide that you want to go flip in your hometown in the Midwest right well I'm sure you probably got family or something there and so getting boots on the grounds not too difficult okay another factor to think about when picking a market is you know long term do you want an appreciation market or a cash flow market okay so what I mean by this is there are appreciation markets and cash flow markets places like Las Vegas California you know Texas Florida things like on the southern United States or what we would call appreciation markets you know you look at the last five years they've appreciated a ton now typically an appreciation markets there's not a lot of cash flow you know if you try to buy house in Vegas right now it's very hard to make the numbers pencil out cash flow wise but you know you look five to 10 years down the road I can promise you it will cash flow because rents are gonna keep going up prices are gonna go up and so if you lock it in today it will cash flow okay but it just takes time with appreciation markets well cash flow markets are typically these cheaper markets in the Midwest maybe some of these other southern states that are less pricey and you're able to get cheaper homes that are going to you know cash flow better the only downside of these homes is they're not going to really appreciate much in the way that Las Vegas or California would so there's no right or wrong answer especially when you're flipping because you know when you're flipping you're not too concerned with cash flow and appreciation because you're not holding it long term like a rental but you know at some point if you want to start building your rental portfolio this matters because you know whatever market you're already doing deals in flipping is probably going to be the market that you decide to start building your portfolio in and so long term you know do you want to be in an appreciation market or a cash flow market you know I still own property in California I own property in Vegas you know we have apartments in Iowa and Georgia so you know it's not like you can't buy another place is to hit your goals but I'm just saying especially especially starting out, these are the things to consider. But overall, to me, the most important thing to look at is just like the boots on the ground, 'cause that's gonna determine more success than anything. And then population, I think, just having more opportunity is going to help you out tremendously. So that's the first step. You gotta pick your market. Now, once you pick your market, the second thing you gotta do is now build, whoops, and D, they're build your team. We've got to build the team now. Now, what are the team members that you are going to need? All right, well, first team member you're going to need is a lender. Okay? Now, there are lots of lenders out there that, you're gonna have to learn about, and I'll give you basically the two main examples. The first one is a private lender. Private money lenders are people who are either friends or family members, and they're willing to give you money in exchange for either splitting the deal as a profit split or just flat interest. So right now we've done both. I've had private lenders who have said, "Hey, give me $300,000 to fund this deal. We'll split the profit 50/50." And when it's all said and done, we split the profit. We flipped it in a few months. They made $20,000. I made $20,000. It was a walk. Oh, not a wash, but it was good, right? They got their money back, they're happy. I've done other ones where, you know, I've said, "Hey, I'll pay you 10%, I'll pay you 12% interest." You know, and however long the money's out is how much interest you'll get. So to make math easy, if you have a $300,000 home, all right, and you are paying 12% yearly, this is annual, that means there's 12 months. So you're paying 1% of 300,000 per month. So if you just do the math, 1% is $3,000. So basically in this scenario, if I took, call it four months to flip the home, you know, I would end up paying this lender $12,000 in interest plus their original investment back. And that's how they get paid. So for us, most of our deals are structured in this way, because we know we'll make more money, just paying interest versus doing a profit split. So, you know, that's how private money works now. I know a lot of you guys are thinking, well, what if I don't know anything with $300,000? What do I do? Good question. This is when you're gonna go get hard money, okay? What is hard money? Hard money lenders are where you, you know, they're professional lenders that are very different than your conventional lenders. You see most conventional lenders are, you know, Bank of America, Wells Fargo, they do 30-year loans. You gotta have two-year tax returns. You've got to have good credit. You've got to have, you know, a certain down payment, all these things, right? And really, what a conventional lender is doing is they are vetting you as the buyer, okay? Hard money is very different. Hard money doesn't really care about your credit. They don't really care about your tax returns. You know, they're flexible on how you get the down payment doesn't have to sit in your bank account for 90 days, you know, really all they're concerned about is the deal, okay? They are professional investment lenders because they know if the deal is good and you don't pay them, they're just gonna end up taking the property back and they'll be just fine, okay? So all hard money lender is really focused on is the deal itself. Now, the way, you know, the pro is, they're focused on that. The other pro is, they will fund the deal quickly, you know, a normal loan might take you 30, 45 days. Hard money lender might take you one to two weeks, okay? So they are perfect for flipping houses. Typical deal hard money lender might do just so you know is a one year deal with an extension. So, you know, it's not a 30 year loan like these other guys. So it's very quick, but that doesn't really matter for us 'cause we're flipping the house. You know, they might do eight to nine percent right now. So definitely gonna be higher than conventional, but once again, when you're flipping, it's not that big of a deal 'cause you're not planning to hold it that long. And they will fund usually 80 to 90% of total cost, okay? So that would be the purchase price and the renovation. So, you know, in this hypothetical example, let's say the total cost was 300,000, you know, the house you're buying in for 270, you know, it needs 30 grand of rehab. They are gonna give you, you know, anywhere from 240 to 270K. Now, this is good news because what you can actually do is combine private money with hard money. So let's just say the private money lender's gonna give me 270K for the steal because they know I'm gonna flip this house for $400,000, okay? Well, what I do is if I don't have any money, I can go get a private lender to give me the remaining 30 grand that I'll need. Now, you need more than 30 grand because you're gonna need to cover your interest payments, closing costs, et cetera. So let's just say you really need about 50K to get the steal done. Well, there are a lot of people with 50K, okay? Whether you realize it or not, you've got friends, family, people at, you know, the club you hang out at, the gym, people have 50K, okay? You just gotta ask 'em for it, right? If you're gonna find lenders, you gotta let people know about the opportunities they have to invest with you. So, you know, for me, what I would do is I would go get 50K and offer a lender 12% interest, you know, basically $500 a month or, you know, I work out a profit split with them and I say, hey, for your 50K, we'll split the profit and, you know, and the split doesn't have to be 50, 50, by the way, it could be a 70, 30, it could be a 60, 40 or whatever, right? You can be flexible with private money on what you wanna do. The hard money is going to be very firm on what it is they want, but you can negotiate anything in private money. So, this is how we get into deals without using any of our own money, all right? So, you know, to recap, when you're building your team, you know, one of the first things you need to find is a lender, okay? Private money, like I said, these are gonna be friends and family and then the hard money are gonna be the pros. And the easiest way to find hard money is literally just Google it. Just Google hard money lenders and a bunch are gonna pop up. If you Google, you know, hard money lender Las Vegas, you'll even see some local options too. You know, some big hard money lenders just so you can go look them up or, you know, Keave, anchor loans. You know, I'm trying to think of a couple of others. Like, those are the two main ones I've used, but there's a ton of them, okay? So, make sure you go check them out because you can totally find these guys easy. Hard money's not hard to find. Private's gonna be harder than hard money, all right? There's lots of money out there. So, lenders, the first person that you've got to do, all right? Second person that you're gonna need to find is a realtor, all right? So, you're gonna need a realtor to help you find deals and also list your flips when it's all said and done and help you figure out, you know, whether or not the deal you're buying is actually the numbers you think, right? So, in this original deal where I said, "Hey, we're gonna be all in for 300. "I think we're gonna sell for 400,000." That's where your realtor is gonna come into play because your realtor is gonna be able to double check that and say, "Yeah, Ryan, I see 400,000." Or they're gonna say, "No, Ryan, I think "the house is only gonna sell for $30,000." So, if that's the case, you know, it's gonna be very difficult for you to make money because after all the fees, which we'll get into here in a sec. But, you know, finding a good realtor is gonna be key. You know, you can ask for referrals, you can call around. You can go on Zillow and just look up realtor's. And the main thing I would ask these realtor's is like, "Hey, do you ever work with investors and house slippers?" And, you know, if the answer is yes or no, you know, obviously we want someone who says yes and, you know, we wanna make sure our expectations with them are clear of like, "Hey, you know, "you'll be able to represent me on, you know, just deals." And, you know, I'll need you to write some offers for me and all this stuff. It's not gonna be easy, but, you know, if you're willing to do that, we can do deals together. 'Cause guess what? You know, we're making offers and we talk about deals here in a second. You are going to need somebody that's willing to write a lot of offers or just get your license yourself. And then you can write all your offers yourself. You can list all yourself. You know, that's what I did my first year. You know, I got licensed in 2010 and I had a license if I got eight years. I wrote all my own deals. I wrote all my own offers. I listed my properties until I eventually delegated both of those things often. You know, I no longer needed a license, but either way, you're gonna need a realtor whether it's you or somebody else. So, you know, you choose, but I will say this. Don't think you have to get your realtor's license right away in order to do deals. Because a lot of people that come in our coaching program, that they're like, "Oh, should I get my license first before I actually start doing the stuff?" No, okay. You don't have to get licensed to get a deal, okay? So, is it nice to have sure in some cases but don't let it stop you from starting, all right? So, you gotta get a realtor. It's not gonna get again, okay? Is an escrow officer, okay? So, you know, some people call these loan, or sorry, title company escrow officer. These are the people that are going to handle the deal. from start to finish. So once you have a contract, what happens is everything goes to an escrow company. Now what does the escrow company do? Or the title company, you know, they're interchangeable really. What do they do? They verify that the title on the property is good. They handle all of the money. They handle the deed transfer. They're checking on the leans and anything wrong with the property. They're verifying that the seller actually owns it that, you know, your loan is going to be good and all this other stuff. So you're going to need, you know, an escrow officer or title officer. Some states, you know, it's the same company. Some other states you got to use both, you know, some states even use attorneys. Okay. Whatever your state does, it's pretty much all the same. Okay. Just different names. But you have to find an escrow officer attorney or title, you know, that you can use. But my advice here again is your referrals from other investors, you know, one thing you want to ask them is, hey, do you guys work with investors? If you don't, you don't want to use them, right? And I would also ask them, hey, have you guys ever done any assignment contracts or wholesale deals? You know, that's something we'll talk about here in a sec too. But if they've never done any of those things, then you don't want to work with them because, you know, they're just going to cause drama. But if you ask them and you say, hey, have you ever done assignment contracts or wholesale deals and they say, yes, and they're cool with it, that's the person you want to use because they're going to understand, you know, how you're going to get deals, which, you know, we'll talk about wholesaling and everything after this. But, you know, the last person on your team that you're going to need is a contractor. All right. So contractors are very important. Obviously, we've got to get these properties fixed up. You need someone reliable that you can trust. You know, contractors are great from referrals. Contractors are great. If you go to Home Depot and just start asking around, you can do things that I call like dumpster driving where, you know, you're driving around the neighborhoods and you see some dumpsters outside. Well, they've got dumpsters outside. They're probably doing some renovation. So go knock on the door, introduce yourself. You can maybe even see the work that they're doing. So contractors, they're pretty easy to find. One main thing I want to say with contractors, I've done other videos on it, by the way. So I'll link to some of my contractor videos below and, you know, probably put a card up here that you can go check out later. But, you know, with contractors, there's a whole bunch of stuff that goes into picking good one. My advice is, you know, make sure you go check the quality of their work before by checking out some of their other properties. Talk to people they've worked with, ask for a list of referrals. And, you know, when you finally get this person, get them and others to give you multiple bids, right? Don't just take their word for it, like have a baseline based on what multiple contractors are saying, okay? So, you know, in the end with all these people, okay, lenders, realtors, escrow, and contractors, you know, you got to start out just getting one, but eventually you want to build the team. You know, I've got lots of lenders. I've got lots of contractors. We've got multiple title companies to be work with. You know, we've got multiple realtor relationships. So, you want to make sure that you're not just relying on one person as time goes on. But when you're first starting out, that is the key. Now, before we get into step three, just want to give you guys a quick thing. I mentioned earlier that, you know, this is what we teach our students. If you had no idea, I actually have a company called Wealthy Investor, where we've trained thousands of students nationwide, how to invest in real estate all the way from flipping houses to wholesaling to buying rentals, Airbnb's, you know, scaling their business to six figures, then seven figures and beyond. So, we have coaching programs, we have guides, we have courses, systems, processes, you know, we give you an accountability coach, somebody who's already been through everything and can help you take it to the next level. So, if you're interested in learning more about the program, you can actually build our book of free strategy call with my team by just going to Wealthyinvestor.com. So, you know, handwriting sucks, but, you know, we'll link to it down below. If you just go to Wealthyinvestor.com, you can learn more about our programs, book a free call with my team. And we would love to help you get to the next level, whether you're just starting out, you know, probably you're just starting out of your watching this video. We've helped many people get their very first deal, and I'd love for you to be the next one. But if you're watching this and you've already done a couple of deals and you're trying to figure out how to scale, how to get to, you know, one deal a month, two deals a month, we can also help you do that. You know, we have many students who have gone down that path of zero to one to ten and beyond. Okay? So, check it out Wealthyinvestor.com. Now, let's go into step number three. Okay? You've got to learn how to evaluate deals. Okay? So, you've got to have the proper formula for evaluating deals. Now, I'm going to give you the, you know, bullet point version of this formula, so you can make sure that, you know, you're evaluating these the right way. Okay? So, basically, your max allowable offer, that's called your M-A-O, M-A-O, is going to be this. Okay? You're going to take your ARV, okay, which stands for after repair value, okay? Meaning, this is the price of the property that you're going to sell at four once, it's all fixed up and nice. So, this isn't the purchase price. This is simply the price at which you're going to sell four when it's done, okay? So, you're going to take your ARV minus your rehab, okay? So, obviously, this is simply how much you spent on your renovation to get the house fixed, okay? Then you're going to minus your money cost, okay? So, money cost would be what you're going to pay your private lender, your hard money lender, everything else, right? You know, if you got interest, your paying or a profit split, you know, those are going to be your money cost, okay? Then you are going to minus out your closing cost, okay? So, closing cost is simply, you know, the title company, right? You're going to pay them both on the purchase and the sale. Closing cost, you know, is usually we budget 2 to 3% total for the deal, okay? Then we're going to take our holding cost, okay? This is the cost of, you know, holding it, property taxes, utilities, insurance, all of that stuff. And then we're going to take our realtor fees, okay? Which these are going to be our costs for listing the property. And then we are going to take our profit. How much we want to make on the actual deal, right? So, you know, we're trying to actually make profit. We got to figure out how much of it we need to make. And this formula will calculate the max allowable offer that you can make. So let me dive deep into each of these aspects and then I'll give you an example, okay? So for ARV, the way we calculate ARV is simply looking at comps now. We talk a lot about ARV and like I could talk about it for another hour by itself. So I'm not going to do that. But, you know, it's simply going to be the nearest comparable property based on, you know, bedrooms, bathrooms, size, you know, make sure it's on the same, you know, area. And cul-de-sac or neighborhood, you know, we're going to look at pools and lot size and you're built like all these things determine, you know, whether or not you're looking at a comparable property. And then, you know, the condition of the property. So for us, what we're looking at is like similar property in stats and then one that's already been renovated and fixed, okay? And one that's already sold, okay? We don't want to look at properties that are on the market. We want to mainly focus on ones that are sold. And if we want to take it like a little step further, ones that are under contract to sell. So we know what might be coming through the pipeline. But, you know, ARV is something that, you know, kind of makes or breaks the deal because it's what you think you're going to sell it for. And that's why having a good real turn to your team helps. But, you know, all in all, let's just say, you know, on this deal, the ARV is 400K, right? From there, we go on a rehab. Now, this is where having a good contractor comes into play because if you get a good contractor, they're going to be able to tell you what the renovation cost is going to be. But just for your own knowledge, one way that we estimate repair cost is the square foot method. So, you know, basically, we might say 10 bucks a foot is a light rehab, meaning like paint, carpet, nothing crazy. You know, we might say 15 to 20 bucks a foot is a lipstick. So on a lipstick, you know, we might paint the cabinets. We're going to put a new floor. We're going to paint, you know, we might put some granite or some quartz in the kitchen, reduce some of the bathrooms. Like it's a very lipstick cosmetic rehab. Then we might say for 25 bucks a foot, you know, we're going full interior. Meaning, you know, like everything inside is brand new. We got new kitchen cabinets. We got new bathroom vanities. We got new showers, all that stuff. And then we might say 30 bucks a foot is, you know, full. just everything. So now we're talking exterior, new landscaping, all that stuff. Now these numbers are just estimates and they're what we use in Vegas. So, you know, here if I was going to go estimate like a full full rehab at 30 bucks a foot on a 2000 square foot house, you know, 30 times 2000 is 60K. Okay. So I'm going to estimate this repair to be 60,000 dollars in that scenario. And so when we're riding out our formulas, we don't need to go get bids right away. We just need estimates so we can make our offers. So in this case, I'll just say that, you know, the renovation is going to be 60K based on my estimates. But these are all just estimates and it will vary based on your market. You know, if you're in a more expensive market like Callie or New York, these are going to be higher. If you're, you know, in a market like mine where homes are a little newer, you don't have to do everything, you know, it could be cheaper. If you're an older market, right, where you're dealing with a home that's 100 years old, this isn't going to work. Okay, because with this, we're not like tearing out the walls and the plumbing and electrical and all this stuff, you know, we're really like these are still kind of cosmetic, cosmetic updates. If you're pulling out all that stuff, throw out this, throw this out the window and double it, you know, and make sure you got a contractor who can truly bid it out properly. But, you know, for this example, let's just say the rehab 60K, you know, and then we're going to go to our money cost. So, you know, before I was saying about 1% a month is our money cost. So, you know, let's just say our money cost for the steel is going to be, you know, 1% a month and let's estimate that we're going to hold this for five months, okay, because we got to know an estimate of how many months we're going to hold it. So, you know, 1% of, let's just say 300,000 dollars, that's 3000 a month, okay, we need it for five months. So, we're going to say it's 15K in money cost, okay. Then we're going to go to closing cost. Now, we always estimate 2 to 3% for closing costs because you get to buy it and sell it. It just kind of depends if you're paying all the closing costs or not. But let's go on the high side and say 3%, we'll use our, you know, ARV on this one. And so we'll just say it's 12K, all right. So, we got 12K and closing cost. Then we've got holding. Now, holding is going to be very different for everyone, right, utilities, taxes, insurance, all this stuff. So, it's really going to vary. But for this example, I would say like for us, a thousand bucks a month is probably fair. So, let's just say that's another 5K and holding cost. Then you got realtor fees. Now, realtor fees are going to vary again, depending on what you give the buyer's agent, what somebody's willing to list it for. If you're just starting out, you know, 6% is like what realtors would call the standard. Let's just say you can get away with it for 5% because you're an investor and they're going to give you a better deal because they want more business. So, let's just say, you know, it's 5% of this 400K. So, that's 20 grand in realtor fees. And then we've got to have our profit on here. Okay, so what's our profit going to be? Well, the way that I always teach our students to do profit is do at least 10% of the ARV. And so, you know, ARV here is 400K. We want to make at least 40K. All right. Now, that can vary once again. But to keep things simple, let's just say 10%, it's like your minimum profit, by the way. It's not like, man, we'd love to make more than that, but that's the minimum. All right. Now that we have all of these numbers, we can plug them in. Okay. To get our mayo. So, let's just plug them in right now. ARV is 400. All right. I'll just, I won't put the case. We got 60 in rehab. We've got 15 in money cost. We've got 12 in closing costs. We've got five in holding. We've got 20 in realtors. Then we've got 40 for profit. So, what does that equal? Well, for those of you math wizards, let me just do it real quick in my head. 400 minus 60 is 340. That's 325. That is 313. That's 308. That is 288. And then that is 248. Okay. 248. All right. 248.k is our mayo, our max allowable offer. Okay. So, you know, basically, that's our break even. Like, you know, at the end of the day, that's the most we are offering this seller for the property based on everything that needs to be done. Could you get it for 220? For sure. You know, if you get it for 220, you know, your profits going to increase by, you know, $28,000. You know, so before you were going to make 40, now you're going to go make $68,000. It's great. But we know that this sort of break even point and we can't pay any more than that. Okay. So, you got to learn how to evaluate deals. And this is how you do it. Okay. This is how you prevent yourself from buying a bad deal. So, that leads to step four. All right. Step four is this. We now, that we not evaluate, we now have the fine deals. So, there's lots of ways to fine deals. I'm going to give you the three main ways. Okay. Way number one is the MLS. Okay. The MLS is the multiple listing services service. This is what you would see online of any property that's for sale right now. And, you know, really you got to figure out how do I comb through the MLS to get deals. Because if I just, you know, try to look through every property. Let's say there's 5,000 listed. It's hard to identify which ones are the good properties. Okay. So, one of the ways that we get deals on the MLS from auto searches. So, auto searches are what matters. And so, basically what an auto searches is it automatically emails you anytime something that fits your criteria on the market pops up. So, if I set an auto search for, you know, a property, like most people set an auto search for their primary home. They'll say, "Hey, I want this mini bedrooms, this mini bathrooms, this area, this price." And so, anytime there's an auto search or anytime something like that pops up, they're automatically emailed the moment it happens. But we can do this as investors too. And one of my favorite auto searches I'll share with you is price per square foot in zip codes. So, the way that this works is this. Let's just say, you've got a zip code. You know, we'll just use the zip code here in my office, 8 9 11 9. Okay. What you're going to do is search for all the properties in 8 9 11 9. Then, you are going to sort it by price per square foot. And you're going to start with the least expensive. So, let's just say in 8 9 11 9, I'm starting at the least expensive and it's, you know, $180 a square foot. Okay. What I want to do is go down about five properties and see what the fifth one is. All right. Maybe I see that the fifth least expensive is $220 per square foot. Okay. And then I see there's a bunch of other ones that are 250, 300, whatever. Right. Well, the more expensive per square foot, I mean, the less likely it's a deal. Okay. The cheaper per square foot, it means that it's probably need some work, you know, because it's priced so far below the normal price per square foot in that zip code. So, you know, what we'll do is we'll set an auto search up in 8 9 11 9 for this 220 number. I don't want to just only get the cheapest, but, you know, basically go down about five homes and get it to 220. Okay. And anytime a property in 8 9 11 9 gets, you know, basically listed at $220 or below per square foot, I'm going to get an email. And every time I get that email, I need to go run the numbers, evaluate the deal and see whether or not I should make an offer and determine what that offer is. Now, with auto searches in a mls, you know, 99 out of 100 aren't going to work, right. It's a numbers game. Okay. Real estate is always a numbers game when it comes to finding deals. All you need is 1% to work. 1% can change your life. You could, you know, if I told you that, hey, you had to make 99 offers to go get the one and that one is going to make you $40,000, would you do it? Right. I mean, you would. And that's just the game. I've been doing this for, you know, almost 10 years now, like this method works. It worked back then. It works today. All right. So, you know, auto searches are great. I would set them up in every single zip code that you want to flip in. And, you know, you could do that auto, you know, and just I give you one more. Another auto search you can set is a keyword search. So anytime a keyword pops up such as distressed or fixer a rougher contractor, you know, these words that might identify it as a deal, you know, investors, then you'll get notified anytime that kind of property pops up with that language in the remarks. So that's another great way to find deals off the MLS. So I love the MLS because it costs you nothing. The way you would set up this auto search is either through the realtor you find, or if you're a realtor yourself, you can just set these up on the MLS yourself, okay? And by the way, while I'm going through this, let me know in the comments. Are you getting a lot of value if you are? Make sure you're subscribed to this channel. And let me know in the comments what parts are sticking out to you the most. You never know, we might pick some people in the comments who we might send to one of our WealthCon events. If you've never been to one of our events, we usually have over a thousand people. Every single quarter, an event called WealthCon, we've had amazing speakers like Brandon Turner, Bradley, Alex Hormozzi, Cody Sanchez. The list goes on and on. We've had a lot of big speakers come through WealthCon. Obviously I speak there and I teach, and it's a great place for other entrepreneurs. So if you watch this video, I just might give some tickets away to our next WealthCon to those in the comments. So let me know what is sticking out to you in the comments. All right, now MLS is one way to do this, okay? Another way to do this are wholesalers. And I'll even love being referrals too, okay? So let's talk about wholesalers because they're going to be the main one. A wholesaler is simply somebody who finds deals for a living and the way it works is this. And by the way, with everything I'm teaching you, you can actually wholesal as well. You don't need to actually buy the home and flip it. But what happens is, let's just say, I'm Ryan, okay? I'm gonna be the wholesaler in this case, okay? So we got Ryan, the wholesaler. All right, what happens is, I find a seller, and he says, Ryan, I'll sell you my house for 300K. And I'm like, great, 300K, that's a great deal. Let's roll, all right? I then find another investor, who's either going to flip it, hold it as a rental, whatever they wanna do. And I know this investor is willing to pay 320K, because guess what, even if 320K, they're still gonna go make the profit they wanna make. Well, what's gonna happen is, the investor is going to buy the property. I am just simply going to assign my rights to buy the property to the investor for a fee, all right? I don't have to actually buy the property first before selling it to the investor. Remember when I was talking about earlier, the escrow company where I said they need to know what assignment contracts are, and do they work with wholesalers? It's for this reason, because you're gonna need to do it, whether you're the wholesaler, or you're buying from a wholesaler. So what happens is, you know, the seller and I have a contract for 300K. That's what we have a contract for. I am going to assign the contract for 20K, because I know he's willing to pay 320 all in. So my contract for 300, I assigned him for 20, now he's all in at 320. The investor is now going to actually bring the money to the deal. They're gonna get the seller, they're 300K, and then they're gonna go get me, the wholesaler, the 20K, and then in return, they're gonna actually get the home. And that's how it works. So if you find a really good deal, you don't have to flip it. You could actually be the wholesaler, that you can make 20 grand, and as little as, I mean, we've done deals in a week, right? We get a property today, we assign it within the same day, and then it closes a week from now, and we make 20K, the seller gets paid out quick, investor gets a good deal, it's a win-win all the way around. So wholesalers are great, especially if you're a flipper, because even if I'm in this end, I'm the investor, I think it's great. Let this guy Ryan find all the deals, right? I didn't have to do anything other than no Ryan. And if I'm getting it for 320, right? And I ran my numbers correctly, and I know I'm gonna flip this thing for 450, and after it's all set and done, I'm making 45K profit. I'm a happy camper, I don't care that I paid Ryan 20K. I'm happy, I want Ryan to bring me another deal, so I can make 45K again, okay? So, you know, wholesaling is an amazing tool. I wanna also add into here referrals, so if you build more relationships with realtors, with people in the industry, you know, they can refer you deals, which is kind of the same thing, right? At the end of the day, the wholesalers like referring you a deal, and you can choose to pay their fee or not, right? If your numbers make sense at 320, buy it. If they don't, then make a counter, say, oh, you know, I can't do over 320, but I can do it for 310, and they may as well, they might take it. You know, I've gotten many reductions from wholesalers and everything, so. That's the second way to find deals. The third way is direct to seller. So, direct to seller marketing is really cool, so we get a large part of our deals now. Basically, what you're going to do is now, you know, you gotta do marketing directly to the seller. So, what are some things you can do for marketing? Well, you could do cold call, right? You're gonna go get data at a cold call. So, if you've ever gotten a cold call from somebody, you know, that's what they're doing. They're trying to see if they can buy your house, right? They can also do text messaging. We've made lots of money text messaging. You could do what's called PPC, paper collect. This is where you rank high on Google. You could do mailers, so this would be direct mail. You know, just sending them a letter in their mailbox and be like, hey, you know, wanna buy your house? Another one you can do is TV. This is what we specialize in. We do a lot of TV commercials that get us a lot of deals. And, you know, the list goes on now. There's so many things you can do. SEO, a search engine optimization. So, you know, these are just a few ones. Now, here's the thing with direct to seller versus the other ones. You know, direct to sellers can actually cost you money. You're gonna have to spend money to market. You're also going to have to, you know, have a sales process, right? Because if you're gonna spend all this money marketing, you're gonna need a CRM, website, a database, you're gonna have to follow up with the lead that's the only way it's gonna convert. So, if you're sales person and you're used to that, it could be great. If you've never done sales, you know, you might find direct to seller to be really hard. And obviously, you're putting up capital to do it. Direct to sales is great. It just takes time to really master, you know. In our coaching program, we teach our students how to do it effectively and cheaply. So, you know, direct to seller is a great thing because you can get big spreads 'cause you're not paying a realtor or a wholesaler or anyone else. But, you know, what I'll say is, with wholesalers and MLS, they don't cost you anything, other than your time to network and to make offers. Direct to seller has financial cost and time. But, you know, the deals you can get are definitely juicier. So, you know, once you know how to evaluate deals, you gotta start making offers and finding deals, okay? Now, that leads to step five, okay? And before I get into step five, let me just once again reiterate this. There's a lot that goes into finding deals and this is probably the most important aspect of flipping a house is learning to find deals. 'Cause guess what, if you get good at finding deals, you can wholesale, you could flip, you could keep it as a rental, right? The core principle of becoming a great and a real estate investor is being great at finding deals. So, like, I know we didn't go in depth on this, like I could talk about finding deals for hours and building sales teams and, you know, making sure you're following up and you're marketing and, you know, the best software's to use, the best providers to use. I just don't have like, have enough time in this to really break it down. But, in our coaching program, we break it down tremendously. Many of our students have built, you know, entire sales teams, marketing departments, everything else we're now. They just get deals, you know, every single week and that's how my business is run now. You know, we have a whole entire staff and team and, you know, they just literally talk to sellers all day, get deals and then my team figures out whether we want a wholesaler flip or keep it as a rental for my portfolio. So, we would love to help you do that wealthy investor once again. If you're interested in a free strategy call my team, click the link below. It's completely free, wealthyinvestor.com. We'd love to help you out, okay? But deals are the most important part. I want to make that abundantly clear, all right? So, let's jump into step five and that is to buy the home, all right? So, you know, what do you do after you buy the home? Well, or sorry, what do you do to buy the home, okay? You found the deal. Now you need to go to escrow, right? So you're going to have this period during escrow, and this is going to be based on what your contract says. Okay, and by the way, wealthy investor, we will give you free contracts, too. I forgot to mention that. So you can get our free contracts. I actually send you a free book that I wrote called Flip Your Future. So you can get access to that, and it goes over in depth on how to fill out a contract and everything else. But you're going to have to go there to get the contract anyway. So I'm not going to go over all the terms of a contract. But just know, your contract is going to have really two things that you need to be aware of. One is called due diligence, and the other is close of escrow. All right, so due diligence is your time to back out of the deal. All right? In a lot of cases due diligence might be 10 days. It could be longer if you negotiate longer. But you've got to decide within 10 days whether you're going to actually buy that deal or not. And really, what happens here is in order to even go into contract, I should add, I guess there's the third thing. You know, it's called your earnest money deposit, or they're known otherwise known as EMD. This is basically your good faith to say, "Hey, I'm going to buy this property. I'm going to put this money in escrow." And that just shows like I'm committed to doing the deal. Now, people ask, how much should your EMDB can be whatever you negotiate? I mean, I've seen people do EMD for $10. I've seen people do $1 million EMDs, you know? I would say if you're on the MLS, a standard is 1% of purchase price. So, a $300,000 house, your EMD would be $3,000. But, you know, you can negotiate $500, $1,000, whatever. Like, on a lot of our deals, we still do $500 because the sellers just don't care. They're like, whatever, you know, $500. Now, let's just say your due diligence period is 10 days. Okay, what happens is after that 10 days pass, okay, basically your EMD is now at risk. If you put a $1,000 down, after 10 days, you know, there's loopholes to get out of every contract, but just know your $1,000 is probably at risk and you might not get it back. All right? But, if you plan on closing, it's irrelevant because you're going to close anyway. Now, if you're in your 10 days and you don't think that you can find a buyer or get the money or anything else, then you need to either renegotiate or back out during this 10 day period, okay? If you back out before 10 days, you're going to go get your EMD back. You get your $1,000 back. So, a lot of people are super scared about, you know, the EMD and where they're going to get it. What happens, you know, if they can't find a buyer or they can't get the money back out before 10 days and you'll be fine. Or, if you negotiate a 30 day due diligence, then you have longer time to figure out whether or not you're going to buy it. And if you can't, then you just back out and get your money back. Or, you negotiate a small EMD so that even if you can't close, you know, you're not going to get hurt tremendously, okay? So, that's the due diligence. Close of escrow is pretty self-explanatory. That's the day you've got to close by. So, you might put 30 days, you might put 60 days, you might put two weeks. You know, obviously the longer you push out an escrow, the better for you, gives you more time to close and find a buyer, find money, all that stuff. So, you know, those are the main things you got to know. You're EMD, you're due diligence, you're close of escrow. And what will happen is, when you have a contract, which you can get at wealthyinvestor.com, you're going to fill all of these things out in the contract. It's going to say, how many days due diligence? What's the close of escrow? How much is there in this money deposit? Obviously, the purchase price is on the contract, right? And, you know, escrow is going to know all of those things and they're going to be doing all of their stuff in the background, making sure that the house is good, there's nothing the seller is lying about. You know, they're going to figure out what kind of loans are on the property. They're going to be working with your lender that you end up choosing to use for the home. Or they're going to be working with your buyer if you choose to wholesale the home to them. So, you know, escrow is handling all of this stuff behind the scenes. And, you know, in turn, once everything is clear and whoever the buyer is, whether it's you or somebody else, ends up wiring the money, they're then going to hands with the transfer or handle the transfer of, you know, giving the buyer the home, giving the seller the money, okay? That's basically what happens. Now, once you buy the home, you then go into step six, which is this, rehab, okay? We're going to rehab the property. Now, with renovating the property, you know, we talked about how you can estimate repair costs. We talked about, you know, how to find contractors. So, some key tips I'll give you with renovation is number one, get three bids, okay? Don't just take the first contractor who says it costs this, like make sure you get multiple bids on the property so that you can compare them, right? Some guy might say it's 40 grand. Another guy might say it's 45. And then you've got a guy who's like, it's 20 grand. And it's like, no dude, the guy who's saying it's 20 grand, he probably doesn't know his numbers or he's lying and he just wants to get the job and then it's going to end up being 45 or even more, right? So, the lowest isn't always the best, but, you know, look at all of them. And the cool thing is with three bids, you're going to actually get different ideas from each contractor, you're going to see how they work and see how bad they want the job. And so, always recommend getting three bids. You know, once you pick your contractor, you also want to make sure you have a contract. We actually have a contract we give our students that we have multiple contracts actually to keep our students protected from contractors. You know, detailing timelines, detailing, lean releases, detailing all these things, you know, releasing liability once the contractor's done so that they can't, you know, do anything crazy after the fact. So, you know, you want to make sure you have the right contracts in place on your rehab. And, you know, you want to just make sure that, you know, you're holding the timeline, right? Your contractor needs to stay on timeline. So, let's just say you agree that it's going to be a six-week project. Well, I want you there at least twice a week, checking on the contractor. So, you know, you go check on them Tuesday and you want to make sure that they've progressed since the week before. Then you're going to check on them on Friday and, you know, make sure they've made works since Tuesday. And you're going to keep the cycle up to keep them on timeline because if you don't check on them, you just expect them to do it. It's not going to get done, right? That's why, you know, if you flip houses locally, it's a lot better than, you know, going virtual. So, if you're going to go virtual or remote, then you need to make sure you have boots on the ground who can go hold these guys accountable. But, you know, the other thing I'll say is, you know, with renovations, obviously you're going to choose finishes that are with the comps. So, we talked about ARV before and you're, you know, trying to match properties that have already sold. So, you know, don't reinvent the wheel. One thing I'll always tell our students is copy the comps. Okay, you want to make sure you copy the comps. Do not, you know, try and be crazy and do some pink cabinets or whatever it is. Just copy the comps. If they already sold the house and had white cabinets and white counters and, you know, LVT floors, just do that. Don't reinvent the wheel. Just copy the comps. Okay. And then, you know, I'll say when you make your payments, be very safe with your payments, right? Contractor doesn't need a lot of them would be like, give me half now and half what I'm done. No, never do that. All right. Pay them along the way as they make progress. If you have to pay them six payments of, you know, $2,000 or $5,000, so be it. But don't ever give them a big payment up front. They don't need it. Okay. They can go and do some demo and other stuff. You know, I say, oh, I need to go buy materials like, well, yeah, well, we'll buy the materials when it's time for that. All right. I'll pay you every week, but I need to see the amount of progress being made. Always protect yourself. I've gotten screwed many times overpaying people too early. And then it just prolongs and things don't get done and, you know, it sucks. So, you know, be very safe on your payments when you're talking to your contractors. Okay. Now, I'll have you said, you know, once that's done, you go to step seven. Step seven is this. You got to list the home. This is where the realtor comes in a play that we were talking about earlier. Okay. So we're now going to list the home. Okay. We need pro picks. Okay. Whenever I see these listings with like iPhone picks, I'm like, what are these people doing? You know, my videos and pictures look more crispy than their home. You know, like get some freaking professional picks. It's got cost you a couple hundred dollars, but it'll make your home sell for thousands more because you've got good pictures. You know, we don't really do a lot of staging in some places. It's more common. You know, we'll stage luxury flips, but you know, the overall just just copy the comps. If the comps had staging, you might want staging. If not, you don't really need it. We do staging on a very, very small portion. of homes. Another tip is like the price. Obviously lean on your realtor, but know your market. If you're in a seller's market, you could price it higher, maybe even above the comps and get created a new comp. If you're neutral, you want to price it very competitively with the comps. If you're in a buyer's market, you might even need to price it below just to get a buyer and get them in. The price is going to be dictated on basically where the market's at and the supply. Once you figure out all those things, it's show time and now you're just waiting for an offer. Once you've listed the home and you've got an offer, you're then going to step eight. Step eight. That's now, let's sell the home. What happens when you sell the home? They're going to basically do the same things you did when you were buying the home and step five. They're going to negotiate their own due diligence. They're going to negotiate their own EMD. They're going to negotiate their own close of escrow. Now the table's turned because you're on the sell side. For you, what do you want as a seller? Obviously, you want a good EMD with a buyer. You want them to close in 30 days or less and you want their due diligence to be seven to ten days or even less because you don't want them to drag out the deal. We want to know that they're going to actually buy. They're going to do all those things. One of the things that's a little different is during their due diligence, they're going to submit what's called repair requests. They're going to send submit repair requests. This is basically going to be them saying, "Hey, I know you flipped it, but we need these things fixed because we got an inspector in here and he says these things need to be fixed." I don't care how nice you fix up the home, it's always going to be a repair request. From there, you got a decision to make. You can accept to fix those things. You can counteroffer them and say, "Hey, I'll fix this, but not this." Or you can just say, "Hey, I'll give you a credit." For us, we always just try to give a credit at the end of the day because most of these repair requests are tiki tacky and they're just trying to like get fixed. When in reality, you could just go to them and be like, "Hey, how about I just take a thousand dollars off the purchase price?" Many of them will take it because they're like, "Oh, I'd rather have a thousand bucks in my pocket. I could go fix these myself or they're not that bad." From our standpoint, it doesn't delay the deal because what happens is repair requests. If you agree to them, they're going to bring the inspector out again, come closing time. If they're not fixed to his liking, you're going to have to go fix them again. It could delay closing. We always prefer a credit, but sometimes the buyer doesn't want credit and they really want the thing fixed or maybe there is a problem we didn't see. We got to go do these bigger requests. I'm just telling you what we would prefer, but more than likely, you're going to have to do something. As you go through their repair request, there's not much else for you to do at this point. You get fixed. The buyer is going to now be trying to get their loan and doing stuff on their end. The title company is going to be doing their thing. Then the buyer is going to have what's called a walkthrough. Now, the walkthrough is pretty much them just checking on the property before closed, making sure everything that was there is still there. They're going to be making sure that the repair request got fixed. This is their final thing before they fully commit and send the money and get the loan. Assuming the walkthrough goes through, you are now going to close the home, which leads to step nine. That is profit. Okay. So step nine is profit. You're going to make your money. Hopefully everything went the way you thought. And you make the 45 grand or whatever the case is. That's literally how how slipping happens. Step by step. But here's the thing. You know, in those as the path, this could be one deal. There is a step 10. It's going to be kind of cheesy. Okay, but it also works because there's no nine step program. You got to make it 10 steps. But you know, step 10 is this. Just join wealthy investor. You know, at the end of the day, if you want to scale this and make sure you do steps one through nine properly, we can help you out wealthy investor. You know, we will literally help you with everything that we just discussed. You know, step one, man, look how much we already went over. By the way, guys, you know, we'll help you with step one, picking your market, step two, helping you build the team. We literally have hard money lenders and things that you can utilize. We'll help you evaluate deals and literally we'll help you evaluate deals as you are evaluating them, right? That's the benefit of having a mentor. We'll help you find deals. We'll help you set up your searches, help you build relationships with other wholesalers like we have thousands of students who have been in our programs. Like I don't care what market you're in. We can link you with another student that you can start doing deals with today. We'll teach you how to do direct to seller, give you all the softwares. You know, we'll help you with the process when you're buying a deal, help you with the process of managing your construction. We'll help you with the process of listing and making sure everything looks good. Then we'll help you with the process of when you're going through selling the home and dealing with these requests and, you know, making sure that the deal goes through. And then, you know, we'll let you do what you want with your profit. But, you know, for us, you know, once you start making profit in this business, you know, that's time to scale the business, right? You did one deal. Now it's time to go reinvest that money and do two deals, do three deals, do four deals. And that's what we can help you out. So, you know, hopefully you found this valuable. If you did, you know, like I said, I'd love to work with you. Might be picking some winners down below in the comments to go to WealthCon. But, yeah, I mean, go to WealthInvestor.com, free strategy call with the team. You can also get the contracts, the templates, my book for free. So, either way, go there. And we would love to help you out. And I hope you enjoyed this video. I hope you found it valuable. And thank you for watching. For the first time ever, I'm publishing one of our live trainings that is going to give you a ton of value if you're trying to get into real estate and investing. It was a three day event where I went over how to find, fund, and flip your first deal.