Do you have these characteristics?
Over time, I’ve come to realize that there seem to be certain characteristics that the successful flippers have that others don’t seem to have and I feel it is why they are struggling with house flipping. This led me to want to put some thought into these characteristics and list them so that you can be honest with yourself about whether you might need to work on some of them.
I’ll be the first to admit that I am not 100% on each of these either. It’s not necessary. But, you will find yourself succeeding at a much quicker rate if you do work on developing these characteristics of people that are kicking butt flipping houses.
This doesn’t mean they are willing to jump off a cliff and hope for the best. The risk is calculated and limited. It’s still there, it’s just that the risk is determined to be worth the chance and effort.
Making an offer to buy a house can be very risky. Can be. It doesn’t have to be. Really let that sink in. It doesn’t have to be.
If you are analyzing a deal and study the comps to determine your ARV, you can limit your risk by being completely objective and finding the middle road where most of the comps are selling. Don’t choose the top values (unless there is a decent-sized cluster of them). Then taking 60-65% of this conservative ARV will certainly put you on the fast track to limiting your risk.
Heck, if you buy it cheap enough, you should be able to easily wholesale the house if you choose to do so.
Just like any new endeavor, flipping houses is going to require you to get out of your comfort zone. Not once or twice, but often. You may or may not get used to this, but you’d better be willing to do it.
Making low offers to sellers will require you to be uncomfortable. If you are not embarrassed or uncomfortable making your offer, you’re probably offering too much. I’ve said it before and I’ve just said it again. That’s because it’s important. Don’t ‘up’ your offers because you are afraid you are going to insult a seller. That is a sure way to end your flipping career early and miserably. I still fight the temptation to raise my offer by just a couple thousand because the higher numbers ‘sounds’ much higher. It’s because I’m a little embarrassed by my offer. But my offer is based on facts, not emotions so I just have to stick with what I calculate and fight the urge to change it.
If you are rehabbing, there will most likely come a time when you feel that a contractor needs to be fired or needs to be talked to about bad work. Most likely you will find this hard to do, but you simply have to do it.
There is a reason people say, ‘it is only business’. It’s not because they are cold-hearted bastards, it’s because they are being realistic. People that ignore problems quickly create more problems for themselves and the people they are providing for.
Sometimes things won’t produce results right away and the successful are the ones that ignore that and keep going until they get the results they want. This isn’t to say that they don’t change things up to get better results, but they don’t just give up either.
The biggest place where this is most evident is in marketing to motivated sellers. Most people give up way too early when marketing. It takes time for your marketing to start getting results. It all adds up and you simply must keep marketing. You have to realize that you are looking for someone with a situation that causes them to want to sell a house immediately, for far below market value. Most people aren’t in these situations. You have to put out enough marketing so that your message does eventually reach these people.
I guess you could say they are persistent. Most of the time you are going to get a no thrown in your face when making an offer on a house or asking for concessions during negotiations. The temptation to give up and feel that deals just don’t exist will start to destroy your motivation. Don’t let it.
Just remember that each no is getting you closer to a yes. Many investors have mentioned the 100-10-1 rule where it will take 100 calls to generate 10 leads worth making offers on and you should land 1 deal out of the ones you made offers on. This may be true in the beginning, but I find the numbers to be much better than this. You should probably be able to get to something like 30-5-2 as you get better at analyzing deals and finding marketing that works better.
There will be times when costs are going to start getting out of control. You can and should be persistent, but there is a time when you have to realize that you’ve given something enough time to work out and if it’s not, you’ve got to chagne it. You’ve got to stop the bleeding.
One time that immediately comes to mind are when certain marketing starts costing too much per lead and per deal. Per deal is what matters most. After several months of marketing you should be able to calculate what your different marketing methods are costing to get a lead and get a deal. The ones that are costing the most might not be of benefit to keep going. The money might be better spent on the other marketing that costs less. It also depends on the quality of the deals and time involved in doing the marketing. So factor those into the equationto determine which ones to focus on.
Another time when stopping the bleeding is important is when you rehab a house and have it on the market for a long time. If you are not getting showings or offers, you’ve got to lower the price. I don’t know how many times I’ve talked to people that ended up losing money on deals because they were too stubborn to lower their price or give concessions to buyers. The worst is when people price their rehabs based on what they feel they deserve for the amount of work they put into it. Ridiculous. Might as well wear a clown suit and stand out front holding the for sale sign.
Successful investors don’t waste time of cruddy leads. The worst thing new people can do is waste a bunch of time trying to work a deal that will never be a deal. If too much is owed and they are not behind on payments, you should just work on getting more leads. Focusing on duds is also bad for the sellers. If you make them feel that you might be able to help them out of their situation and waste a week of their time or more, you are doing them a huge disservice.
If you are not making offers you are not doing deals. Period. Exclamation point!
An offer a day will keep the bill collector away. You need leads in order to make offers. Focus on your marketing and when you gets leads, focus on making offers on the ones that have any potentional of being a deal (have enough motivation to sell and enough equity to sell for what we need to buy for).
This gets into focusing most of your energy on what matters most. Some people (i.e., me) will spend all day designing business cards and feel like they’ve accomplished a lot. Not really. If I had spent all day getting my marketing message in front of the people that need it and looking at houses and making offers, then I could really say I’d accomplished a lot.
These are the characteristics that I feel most successful investors have. If you want to go above mediocre status and really take off, start with working on acquiring these characteristics. It’s a great start.
I’m starting today.
DannyNext: 166: Corona and What Now
100% true. Good post
Danny, great timing on this article. I’ve been kicking myself all night and this morning; I made an offer on a property yesterday on a deal that I really wanted. The seller was very motivated to get out of his paid in full house that has a tenant living rent free for 10 years. I offered 315k on an ARV of 575k. I didn’t get mad when he slammed the door on me nor did I get mad when he called me 15 minutes later to chew me out and call me names. What bothered me is that I kept second guessing my ARV….should I have calculated the highest comp when the other 10 averaged lower? Should I have calculated the ARV with an additional bathroom (not knowing if my cash buyer would actually put one in)? Stuff like that. I’m glad I stayed firm on my calculations and now I feel better about it. Thanks,
That can be tough. I still do it all of the time. Sometimes you calculate the numbers and your gut knows they are right. Maybe there was one that was more or other reasons like you mentioned. Stick with your gut though. It sounds like you did.
Who knows. The seller could end up calling you back several months from now. But, for now it’s time to work on getting more leads.
#7 is so true. I recently spent way too much time designing email sign-up forms, newsletters, reading how to grow my blog, etc. instead of focusing my time on finding deals and making offers. After talking with my adviser (mentor is too strong of a word), he really hit home that I’m wasting my time with everything else and to get back to generating leads. It was a great kick in the pants and I’ll be expanding my mailing lists instead of worrying about having the world’s best blog. Great article, Danny.
I’ve had the same problem. It’s hard to not get sidetracked by the next shiny thing.
Yeah, ADD and shiny things can be my kryptonite — I always have to make sure I stay focu… —- Ooooh a Butterfly!!
Make offers, make offers… This is my lame leg.
I am not looking for leads with direct or indirect marketing, just cannot get it. I keep an eye on MLS and I don’t like what I see. Ugly houses is too ugly for me and I cannot make low ball offer to owner with decent house. So I am stuck with auctions but what is going on over there these days is hard to describe. The bids way over not just assessed value but highest comps are normal now. Few years ago I tried to drive for dollars but quickly found that 20k current value abandon houses have 120-200k mortgages on it, so I stopped looking. Not long ago accidentally I made one flip with other buyer money but all my other deals were done only with own financing which is too limited to talk about real business. To feel better I read your posts guys, and yea, I enjoy it.
Thank you Danny for help with my baby-webpage and for your site! It is so unique, wish it to grow and prosper!
It sounds like your mindset is what needs the most work. Just want to be honest with you so that you can push through and make it. You talked about trying things and having bad results. Then you quit because you assumed you would always get bad results.
My suggestion would be to market to the vacant houses again and find the ones that don’t have 120-200k mortgages on them. They do exist, you just have to be persistent and find them.
As far as some houses being too ugly for you, why not try and wholesale them? Then you wouldn’t have to even own them (if you just assign contracts).
Above everything else, please keep a positive attitude and know that you deals are out there and that YOU WILL find them.
I like your article Danny. I can say without a doubt #2 is the one that I can say is the hardest leap to take for beginners. Most of us are looking for that “perfect house” to flip and will not make a move until that comes available. Unfortunately those “perfect houses” are few and far between. As a contractor I try to look outside of my comfort zone of quick DIY projects and deck and roofing problems that I used to do by myself and instead look at the house as a whole and find a trusted contractor to fix anything that has problems.
Sounds like you are doing the right thing. Getting out of the comfort zone to allow your self to find and do more deals. Thanks for the comment.
I was wondering when you are making offers to home owners you found on your own through various marketing ways ( driving for dollars, absentee owners, etc.) do you get your real estate agent involved in the transaction where you give them a commission? Do these home owners like having a “middle man” ( agent) or would they just rather do the transaction with you?? We currently have a contract with an agent for a few months and I was curious if doing these marketing methods to connect with motivated home owners and make offers is still doable with having an agent or are these methods something better done “privately” between flipper and home owner?? thanks for all your help!
No. The deal is just between me and the seller with nobody else involved. I don’t think people would want agents getting in the middle. They’re just not necessary for what I do.
My thoughts are that the sellers what to deal directly with you. You can use your agent, but the sellers need to know that it does not affect what they are getting out of the deal.