Hey friends, Kris Krohn with my expert friend, Jerry Norton here to talk about
how you start a fix and flip business. So, fix and flip really is Jerry, the
buzzword. Because people are thinking fix and flip must mean make a lot of money.
That can be a misconception, it can also be true. We're here to dispel
it and really share with you the 6 steps of what it really takes to start a
fix and flip business. These are not my 6 steps. So, if you like them, blame him.
If you don't like them, blame him. But he is the expert. So listen, he is really
the one to be learning from. -Well and here's the thing. When you talk about a
business, a business to me is something that you can repeat and you have
processes. And there's a way that it can be done again and again, right? That's a
business. -Systematized. -Systematized, right? The number one mistake most people make
is they don't think about the processes and systems. They just go up there and
chase after a deal and then maybe do a deal. Maybe make some money and then, "Oh,
and I'm going to start all over again with this process." What we want to do is we
want to look at it break it down and then put in place a process to do each
one of these steps, okay? So, here we have. -Alright, let's go through man. -Alright,
so first one, number one is obviously we have to find a deal, right? This is our
lead acquisition or our lead generation. It's getting out there and looking
for a distressed real estate that you can pick up for a good deal. -Because if
you want to fix and flip business, you need something to fix and flip. That means
that you got to have a house. -That's right. And if you're going to do for the
first year, then your system needs to be able to find for succulent deals that
you can rock out. -Yeah. So, first we have finding. Now, once we find that you know,
motivated seller or that distressed property, the next thing we need to do is
crunch the numbers. You know like, what is... What makes this a deal? What number do I
need to get it for? To where I've got my profit accounted for? And my closing costs
and my carrying cost for the capital and all these different things that go into
the deal, right? Do the math. And then we call that our buy price. You only analyze
it to determine what's the price I need to get it for to actually make a profit.
-This is actually one of my favorite things to do. When I got it started in
the game of real estate, I was calling it number crunching. And someone was
offering a property out there and when I love to do is I love to say, "Okay, fixed
up. What's it worth?" And I get excited because I... If I knew as buying it for a
150 but fixed up it was worth like 220, I'm like, "Okay." I know that
I'm starting with 70 grand. But now some of that's going to whittle down. Because I
want to hold this for a little bit but, okay this has 10 grand of cosmetic. Okay,
70 just turned into 60 grand. But I'm going to hold it so I don't have carrying
costs, with the way I'm doing it. I don't have selling costs. It's just ten grand.
So, I'm like, "Okay, I can lock down $60,000 of equity." If I cashflow
this beast, 4 or 5 hundred dollars a month,
collect a down payment. You know 5, 7 years later I can make
$112,000 on this. And I'm like, "Alright." I could you know, I'd
analyze the deals. I say, "Man, this is good now." Fix and flip. You got, you had a few
more numbers to factoring because you're not going to hold it. -Yeah. But it's still a
formula. You still analyze it. You determine you know, your profit on the
deal and you go from there. By the way, we got a great video on
analyzing and what that formula is so go ahead and check that one out.
-So, after you've analyzed it. Now, it's time to actually present an offer. And
this is where the rubber meets the road. This is where people go from, you know,
"Hey, I'm thinking about real estate too." No. Now, I'm actually doing something
because you're putting an offer in front of somebody. This were most people, they
just get, they just kind of fall off the wagon. They're like, "I'm afraid to make an
offer." You definitely need a mentor. And some people on your team, you can run
deals passed. And we both offer that so that you have actually helped there. But
yeah, so find, analyze, offer. And then we've got the railroad tracks right here.
Tell me real quick. What is this about? -Well, this is basically our acquisitions,
right? This is everything we need to do. These first three steps to get a
contract. To actually get the deal. Once we have the deal, we have that executed
contract, we now have some options. Our exit can look like anything we want. We
could keep it for buy and hold. We could fix it up and flip it to a retail buyer.
We could actually wholesale it to another investor and let them deal with
it. The second half, these next 4 steps,
this would be basically our... I like to call Operations or our Exits, right? How
am I going to now exit out of this deal and actually make some money? To do that
with fix and flip, we've got 4 steps. So, let's talk about the 4 steps. First
of all, if you're going to fix and flip that property and you've got a contract,
you've got a closing coming up in 3 or 4 weeks. Guess what you got to do?
You got to have funding.They ought to have money put together so that you can
buy that property from the seller. You got
capital set aside for your repairs, right? There's no way around it. You've got to
have that capital in place to do a fix and flip. -You might be using banks money,
partners money, hard money. There's all sorts of different options that you have.
But you got to line that up. Because at this point, you don't have to have any of
those resources. You basically found it, you tied it up and then you gave it to
someone else and you wholesale it for for a nice, tidy profit for yourself. But
at this point you're saying, "Now, I want to actually acquire the assets." -Right. And
it's for me to resell or it's for me to hold or to do what I want with it. So... -Yeah.
-You got to fund it. -So, you've gone to the closing, you've you funded it, you now own
that property. Even if it's for a short time you own that property. Now what you
have to do, you have to manage now the repairs. And it could be carpet and paint,
it could be cleaned it up put it back on the market.
It could be we're going to be you know, new roof, new siding, new windows, new doors,
new trim, kitchen. It could be an extensive rehab. Whatever it is, you've
got to then manage that renovation. And then your last step is put that baby on
the market and find a retail buyer, a homeowner that's going to buy it. -One of the
things that I hate about flipping is it's like, okay, I bought it for 100
and it's worth 200. -Yeah. But then I'm like, I've got to pay the seller
costs and I got to pay the closing costs and I got to get a little bit of discount and I got it...
And all of a sudden it's like, I found so much equity but I can't realize it. If
you got the right margins, you can you can fix it and sell it and actually make
a great profit. But what I'll often do is after I fund it, I'll do my rehab and
then stead of selling it, I'll hold it. And what I'll do is, I'll do my
compassionate financing lease option system. -Yeah. Where someone will give you
ten more thousand or $5,000 down payment. Which is equivalent
to kind of like my deal finding piece that I get up here. -You'll get a premium
because yourself, you're doing trade... Someone, something to get a higher
cash flow on it usually $200 higher than a normal rent. And then when I go to sell
it in 3, 4 or 5 years, I don't have to pay the realtor fees and so a
lot of my costs have gone down substantially. But you know, not
everyone's in a position with their homes, Jerry. Where they can hold on to it
for 3, 5, 7 years. That's a great strategy. If you're going to do that.
If not, find, rehab and sell. Boom! I want to show this just as a bonus. Because
when I do my lease option system and if we were to compare that to like just
flipping on this side. And if we were to talk about $100,000
deal that had a $200,000 value, here you know, if you're
putting in your typical 15% profit, here we're looking at making 30 grand. Here, on
this side, we might actually make $70,000. -And how much time you have to wait? -You
have to wait. You have to do the time value of money. Because this is 30 grand
that you could get in the next couple of months. And this is 70 grand that you
might get spread out over a 5 or 6 year period of time.
And so, is one better than the other? Well, if I clipped 20 of these and I have a
cash flow in each one of them, I might be able to quit my job. Because you're not counting cash flow,
right? -Nope. -Yeah. Just just equity on the sale. -But if I do this one, I could quit
my job right away and say, "But I've got the now money to get in the game of
real estate." Pros and cons, different approaches. -And you can mix it up. -So, it's
interesting because this is all about wholesaling. And then once you get here,
you can actually go into a hold or you can go to a resale. You got 1, 2
3 different strategies and different options of what you can do. -Yeah. And it's
really all about where you're at. Your position, you know, what's best for you.
There is no right or wrong. -Yeah. -All of these work well. -Yeah. Friends, we want to
throw this little bonus. I know we're really in this video talking about the
steps of fixing and flipping and starting a fix and flip business. But I
think it's important to always know what are my other exits. I could exit early in
the game, if I'm nervous about going in long-term on this deal. I could choose to
actually hold it if something like that the market turned and I couldn't sell it.
"Hey, do I have a back-up plan?" I actually flipped it and I love the money that I
got. I think it's really great to be able to have some of those different options
that you can really specialize in. -You know what's cool about that is my actual...
What I actually do is when I go into the deal, I know that I've got to have a
certain type of deal. Once I get to this point, I stop, I take a step back and I
say, "You know what? What is the best exit for me right now in my life? With what I
have going on in my business and my personal life." Do I really just want to
wholesale it. Be done and make a quick buck. Do I want to go through the effort
of fixing it up and flipping it and you know, making a quick turn. Is this one
that would be great to just put a tenant in here and and hold this thing for 5
or 7 years, you know, I like those options that you talked about. It's great
to have those options. For people who are like, "Man, I need five grand, I need ten
grand right now. I want to get into this, pull ceiling." If you're looking for the
quickest money with the least amount of work, wholesaling is without a doubt the
way to do it. -Yeah, awesome. Jerry, thank you so much for
your expertise and for taking 15 years of experience spread over all those
deals. And friends, here's my invitation for you. If you're really interested in
anything that we've talked about here, you got to click the link and learn more
about what we're up to and what we're doing. Because these videos are designed
to create as much value for you. And I love it when I get the messages from
people say, "Kris, I watch the video, I read the book or I listen to Jerry.
And now I'm out there doing it. I'm like, yes!" But 99% of people, what they're
really looking for is additional hand-holding. If you're looking for tools
to how we can take you by the hand and walk you through the process, show you
how to make $10,000 by doing the first part. Learning that'll make 70 to 100
thousand dollars on a hold. If you want to learn how to fix and actually
flip and make it max profitability there, click the link, sign up for the free
course where you can just learn more get, free tools, get free software on how to
find these deals and let's get you in the game. Because the most important
thing we can do is you watch this video because you said I want to learn how to
have a fix and flip business. But now you've watched the video and it's time
to do something about it and make that business into a reality.