Week 10: How to build a fix and flipping business that runs without you
Many people want to get to a point where they can flip 5 to 10 houses a year or more. However, it is much easier to flip one or two houses than ten. When you hold multiple flips at a time, it gets very expensive. You need cash for carrying costs, financing costs, down payments, repairs and more. Plus you need to make sure you have the proper insurance and entities set up. This module will go over the things you need to focus on from the very beginning to create a high volume flipping business.
Goals for this module:
- Create a plan to be able to finance or have the cash for a flipping business
- Figure out the best entities and insurance structure
- Build systems to keep track of the most important aspects of flipping
- Build relationships with multiple banks and private money lenders
- Who do you hire first and who do you need on your team?
1. How much money do you need to run a large scale flipping business?
If you are using hard money or a partner you may be able to do many flips at a time without using a lot of your own cash. However, the hard money lender or partner is going to take a large chunk of the profits.
To have an awesome flipping business set up, you must have multiple sources of financing. We talked about financing earlier in the course, but if you want to be a big-time flipper you need to find great portfolio lenders and private money.
- If you have not done it yet, create a list of possible private money lenders. People who you know who have money.
- Always keep an eye out for local banks and always ask other investors or lenders if they know of local portfolio lenders. I am searching for lenders myself and some of the best referrals have come from other banks
2. What kind of entity and insurance to use?
When fix and flipping one house, insurance and entities are not a huge deal. When you are flipping multiple houses at once the entities you use and the insurance can have a huge impact on the bottom line. Finding insurance for flips is not easy! Deciding what entity to use is not easy either. Always consult a tax professional or lawyer for specific questions, but here is how I have my business set up.
I would highly suggest using J Darrin Gross to set up your insurance as that is who I use. I would listen to this podcast from Clint Coons on entities. I did a free consultation with Clint, but did not use any of his services. They are a bit pricey, but if you are getting things set up initially it may be worth it.
- Consult with an accountant and attorney on the best ways to set up your business for taxes and protection.
3. Finding the right contractors and creating a system to manage them
Contractors are a necessity for any flipping business. However, they can also be one of the biggest headaches! Not only do you need great contractors, you need to manage them well and make sure they keep doing their job.
We have talked about contractors in a previous module, but this is not about finding contractors, this is about building a team of contractors.
- Create a list of possible contractors and subs. Do not leave anyone off! If they are bad, note it so you will remember them in the future.
4. Who is the first person you hire and how is my team set up?
I have an awesome team and I have been really lucky to find great help. My assistants are great, my team manager is great and we all like each other. Building a team is very important and will be a requirement for a big time flipping operation.