7 Characteristics of Successful House Flippers
Do you have these characteristics?
Over time, I've come to realize that there seems 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.
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1. Willing to take some risk
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.
2. Willing to get out of their comfort zone often
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.
3. Are consistent in their efforts
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 you message does eventually reach these people.
4. Don't take no for an answer
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.
5. Know when to stop the bleeding
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 equation to 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.
6. Know when it's time to be creative and when it's time to move on
Successful investors don't waste time on 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.
7. Focus on making offers
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 potential 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.