Copyright © PRYME HOMES

The Ultimate 
Guide To 
Flipping Houses Successfully

Flip Houses With Confidence
Learn how to really flipping houses really works from real investors. We hold nothing back! We cover everything we have learned while flipping houses and growing our investment business.
Why Flipping?

MINDSET

We like to start by stressing how important mindset is when flipping houses. Many people underestimate the mindset that is required to succeed in flipping houses. 
This usually leads them to losing a lot of money and failing in their journey.

Who Is Flipping Houses For?

Flipping houses is for someone that loves real estate!

Flipping houses is a FULL-TIME job. This is why you need to love it. You should love everything you do in life. After all we only get one to live. 

Flipping is not an exception.

This business is very hard and extremely stressful. 

Please don't think for one moment that this is not a business. You MUST run it like one at all times. 

As a business, there are a lot of parts of it that are extremely boring but must be done. This is why loving what you do matters.

The musts:

You must be willing to roll up your sleeves when a deal goes bad.
You have to be prepared to drive all over town to buy materials.
You must be ready to check on your projects everyday.
You must be ready to fire your contractor a week before the job needs to be done.
You must be ready to personally manage every project.
You must be ready to run your own books.
You must have a background in investing in real estate or a great partner.
We will break down all of these musts as we go through this guide.

Who is flipping houses NOT for

This is not for people that think this is easy money. We see many people get into flipping because they think they will be rich! If you're getting into this business because of money, trust us, there are easier ways. 
This not for people who already have a full-time job. You need to be ready to go put out any fire at any given time of day. We mean metaphorical fires, real fires should be handled by the fire department.
This not for you to live your HGTV fantasies! We get that you watch the shows and they make it seem like it's easy. That even though everything goes wrong they still make money.
Real life doesn't work like that. Sometimes things go wrong and you can lose tens of thousands of dollars.

GETTING STARTED

There are 3 main parts to every deal.
1

Experience

Being able to make that deal profitable.
2

Money

Having the money to fund the deal.
3

Deal

Finding the property the will be perfect for a flip.

#1 The Experience

If you're new to flipping then you MUST get an experienced partner. By experienced we mean someone who has actually flipped houses successfully.
Many people think that all they need is a contractor. This is wrong.
Being that the partner you need has experience in flipping houses you have two things to offer.

1- Money. Here you have to money to either buy the house, do the rehab, or maybe both.

2- The Deal. Here you found a great deal to partner with someone that has the experience.

If you can't offer one of the two then no one will want to partner with you.

The difference between a contractor and 
an investor.

A contractor, even a great one, is only good at being a contractor. This means that they know HOW to fix things.

The investor on the other hand knows WHAT and WHY certain things need to get fixed. We've seen many investors get in trouble for doing what the contractor thought needed to be done.

You should only hire a contractor to do the work. An investor should determine what that work is.
#2 The Money
Once you found the experience to be able to handle a flip you need money.

This does not mean the money needs to be yours.

We built PRYME Homes by partnering with a lot of investors that have money. We would combine our knowledge and resources with their money to get deals done. Now, we have many investors willing to lend to us for any deal we want to do.

Lets go over the different sources of money you may be able to use.

1- Hard Money Loans (HML)

This is a very common and popular route for many first-time investors. HML are usually a business that lends money based on the deal.

This is great choice when you have very little money and a great deal.

How HML typically work is they will verify that you have a good deal, usually 70% of ARV minus repairs. Then they will lend based on those risks. These are usually short-term loans 6-12 months and the property is used as collateral.

Here is the downside with this, it's expensive. As we have seen the market get hotter, at least here in Texas, we've seen HML drop their fees. But this is only for investors that have done a certain amount of deals with them.

Usually their fees are 2-4 points and 10%-14% interest.
What does this mean?
2-4 points is 2%-4% of the loan amount. 

So say you're borrowing $100K you would need to pay $2K-$4K upfront.

10%-14% interest is applied to the rest of the loan. Usually this interest is per annum. So, you would pay $10K-$14K over the course of however long you had the loan.

Using the $100K loan it'll break down like this...

$100K Loan

$2K-$4K (2-4 points upfront)

$833-$1166/month(10%-14% interest) if it takes you 6 months to flip it then it'll be

$4,998- $6,996 ($833 X 6 - $1166 X 6)
So, why is HML so bad? In this example you're spending 7%-10% of the total loan just on the money costs. This is not including the 6 months of monthly reserves some require as well as other fees that are incurred.

We're not trying to scare you from using HML. We just want to make sure you take into account all of the real costs.

2. Individual Investors

We used to refer to them as Private Money Lenders but HML started using this term too. They justify it by simply saying that they are also PML.

So what's the difference between a HML and an Individual Investor?

An Individual Investor is 100% negotiable. This means you can borrow money at any terms you can negotiate.

When we first started we developed a relationship with someone that had money. He started lending to us at 2 points and 12% interest. Now, we're borrowing money at 8% interest only paid all on the backend.
What does this mean?
All of the monthly payments accrue and once we sell we pay them off! This is great because it leaves more working capital in our pockets for the project. We are essentially paying them using the profit that's generated rather than coming out of pocket during.

If the investor wants money payments you can factor that into the loan. So you can actually borrow your monthly payments. Yes, you will be paying interest on that money. But, 8% or even 10% on say $5k in payments is less than $50/mo! Well worth it!
While this option sounds great, you need the credibility for this. 

People aren't willing to lend to someone they've never met or can't prove experience. 

All of our Individual Investor have to come to us because of our credibility.

3. Partnership

The last way to get money is through a partnership. Like we said above, our first lender was actually a partner. We had found a great deal. He had already bought a couple wholesale properties from us in the past. This had helped him know that we are very transparent and know what we're doing.

But, this didn't prove flipping experience. 

It was because bot