How to Start Flipping Houses for Huge Profits in 2025 (Step-by-Step!)

Ashley:
Real estate investors often eventually find their niche, whether it’s buy and hold, short-term rentals burrs. But today we are joined by an expert in flipping to talk through what to expect for flips in 2025. High interest rates aren’t going anywhere anytime soon, so how do you need to adjust your flipping strategy to still be successful in today’s market? We’re going to get into everything from how to analyze a flip through low cost renovation tips. So welcome back to the Real Estate Rookie podcast. I’m Ashley Kehr and I’m joined with my co-host, Tony J Robinson.

Tony:
And this is the podcast to help you kickstart your real estate investing journey. And we are so excited as always to have none other than James Dainard on the podcast once again. And if you dunno, James, he’s not only an expert in the world of flipping, but he’s also one of the hosts of our sister podcast on the market, and he’s also the author of the newest BiggerPockets book, the Flipping Framework. So Jimmy, welcome to the show, brother.

James:
You know what I got to say? I never thought Annie would ever call me an author,

Tony:
But here we are.

James:
But here we are. The world is changing. I’m happy to be on with you guys. You guys are some of my favorite people to chop it up with.

Ashley:
Well, James, we’re here to talk about your new book, the Flipping Framework, but to kind of start it off, let’s give some value add right away. What is something that makes a flipper stand out, something that gives you that edge, that gives you those successful flips?

James:
I think that’s a great question because the biggest line real estate is the money’s made on the buy because it really depends on how you can execute the plan. So the difference between, I think a very seasoned flipper, they can execute and are very active, isn’t about the deal flow, it’s not the money, it’s the resources they have. They give them the capability to be able to execute the plan. And so I think for any flipper out there that is growing their business or they want to establish the best, you have to have the core components and that’s the people to operate the plan and your vision. So you can control the cost because a lot of times if flipping isn’t about the buy you get, it’s about how you invent the return by putting the right plan on the deal. And so the flipper with the most resources, contractors, vendors, those are the ones that have the best businesses.

Tony:
Let me ask one follow-up question to that, James, you talk about business plans a lot or the plan for the flip itself and how does a rookie come up with what the actual best plan is for a specific property? Because I think we can all maybe identify, hey, this is a really cheap price in comparison to other properties in that market, but how do we actually put together the right plan for the property,

James:
How you put together the right plan, how we can do it. We’re very, very active in the Pacific Northwest where flip or we’re involved in a couple hundred flips a year. And the reason we can do this is because we have the right team around us. And so to come up with the right plan, you need the right team around you and the right team. Your first person is going to be your real estate broker because that broker needs to A, be able to help you identify opportunities, but also to give you what is highest and best use for the property. And so when you want to come up with this plan, how do you make money on this? How do you create equity? It’s about taking data, going through it, and that data’s recent comparables because every house is going to have three sets of comps.
If I’m looking at a house that’s a three bed, one bath house that’s on a thousand square foot footprint and I’m looking at comps, there could be one that it’s a very cosmetic update pricing, which is maybe they have new flooring, new cabinets, new trim, spruced up back to market, a little bit more affordable. Then there’s going to be the secondary plan, which is, well, maybe they take that cosmetic and they take it to a higher level and they start updating roofs, windows, updating all the fixtures to a higher level to where they’re putting in nicer cabinets, nicer appliances, then go for a higher price. Then there is selling it for the most typically, which is where you’re going to add amenities, which could be adding a bathroom. If I’m taking a three bed, one bath house and I turn it into a three bed, two bath with a primary, that can substantially increase the value.
But all three of those cost three different types of renovation budgets. And as flippers, what we’re trying to do is find out what is highest and best use and highest and best use is creating the most profit, not selling it for the most. And so what we do is we always pull three sets of comps for each property. What’s the least amount of work we can do to create a margin? What’s the middle ground? How can we make it really nice without moving walls and changing and adding spaces? And the third is always how do we create the most amount of value, which is going to be adding bedrooms, bathrooms, maybe finishing square footage, but then after you find those three data points, you then have to map the budget. So we find three different sets of comps. We run three different budgets for what we’re trying to accomplish there, and then it goes into our performa to tell us what is the highest profit and the performa going to calculate what our purchase price is, what all our takedown financing is for the hard money.
Because many times we’re taking these properties down with cash or hard money is expensive, we calculate those costs. The costs are anywhere between 10% interest to 12% interest and one to two points. And then we subtract the selling costs, the rehab cost, and it kicks out the net profit and whatever is the highest annualized return, the highest profit that we can make over a 12 month period, that’s the plan that we go with. And so it really comes down to having that broker that can help pull those comps, explain to you what needs to be done to get to that value, and then having a good construction team so you can run the budgets for each one of those plans and then you can make the right decision.

Tony:
You said something that I just want to highlight for our Ricky audience because I don’t think a lot of people approach flips in this way, but you said we look at the profit, but then we look at it as an annualized return. And I think when we look at traditional long-term rentals, short-term, medium term, whatever it may be, a lot of us look at that annual cash on cash return. But when we talk about flipping, most people just look at the pure number, how much cash am I getting back? So can you explain, James, why you look at not just the raw number of profit but that annualized return and how do you actually calculate that annualized return?

James:
Well, the reason I look at deals on an annual basis is because it tells me when to buy a deal and not depending on the duration. And so how you calculate an annualized return is let’s say I’m buying a property and I have to invest a hundred thousand dollars into this property for the purchase price, the rehab costs, the holding costs. Now if I can make, I try to make a 35% return every six months, so I’m always shooting for about a 60 to 70% annual return. And if I’m looking at this property that I have to invest a hundred grand into and I can make $35,000 in six months, that’s going to give me my 35% return on an annual basis, that would be a 70% return. And so the reason I look at everything annualized is because it tells me when to do a deal and not to do a deal because clarity is so important for us as investors, what do we want to buy and does it really make sense for our goals that we’re trying to achieve?
Now with flipping, flipping is one of the best asset classes that you can grow, the most amount of profit, you can grow your cash the quickest, but it’s also the riskiest things can go wrong very quickly. And based on that and based on the risk in the market and the asset class, I always want to know what am I comfortable with? Because if I’m going to take on this much risk, I want to make sure that I’m getting a certain reward. I don’t ever look at net profit on a deal. I look at how much cash do I have to invest, how much am I going to make out and what does that look like on an annual basis? So if I know I want to make a 70% return on a 12 month basis, if I’m looking at a deal that’s going to take three months to do, it tells me when to buy a deal.
So if I can do a really quick deal and if I want to make a 70% annualized return, that is going to turn into I need to get a 25% return in 90 days. Now if the deal’s going to take me a year when I’m looking at the numbers and I’m looking at where do I need to buy this thing at, I want to make sure that I have a 70% cash on cash return because it’s a 12 month basis. So by putting my buy box and putting my expectations at an annualized basis, it tells me when to buy a deal and not to buy a deal based on how long I have to hold it for.

Ashley:
We have to take a quick break, but I wanted to let you know if you are learning a lot from James’s advice on this episode, you might want to check out his new book, the House Flipping Framework. James has flipped more than 3,500 homes and his book outlines the strategies he uses to maximize value in flips and make them a sustainable part of any real estate portfolio. So go check it out now at biggerpockets.com/house flipping. Okay, we’ll be back shortly.

Tony:
Alright, welcome back to the show where we are joined by James Nart.

Ashley:
As a rookie investor, how do you even come up with what is a good percentage? So you’re saying 70%, but if you’ve never invested in real estate or maybe this is going to be your first flip, how do you decide what is a good percentage? Does it depend on your market? Does it depend on your other investments? Kind of give us an idea of how can I decide as a new investor what my percentages that I should be reaching for?

James:
Yeah, and that is a great question. Some of that is your own personal choice because it does come down to risk. If I’m going to take on a property, and like I said, you can lose money very quickly on a flip, I mean I have cut checks for hundreds of thousands of dollars on a house just to get out of that house. And so it comes with that risk. And so if I’m going to take that risk on and based on where I want to be on my goals, I want to make a certain return. So if I’m not making more than 20% on my flip, I’d rather go into a less riskier asset class. I can do private money financing and make 12% and a couple points so I can make 14% of my money without having to do the work and having a lot less risk on the deal.
So for me, on a flip, I want to be at least double that because I’m taking on this risk and so I want to be at double, but then I need to find out, well, does that make me participate in our market? Because every market is different. Some are more competitive, some are less competitive, some markets are more affordable, some are really expensive. And based on pricing of homes and what your competitive nature is in your market, you have to make your adjustments. And so how you figure out that market and how you figure out those returns is the best thing you do is start going to meetups and talking to investors and finding out what they are usually making on their flips. Because if I ran into Tony at a meetup group and he’s like, I want to get into flipping, Hey, can you tell me how much money do you typically make on these things?
How much money do you have to have? I’m going to be able to explain that pretty well. Like, Hey, on my last deal I put on a hundred grand and I made 40. And if I hear that consistent tone, that tells me, okay, I got to be around a 40% return. Now another way to do it if you don’t go meet up with investors is you can track this with data fairly easily. There’s so many different websites out there that will help you track flippers to where I can, or even my title rep, I can actually call up my title rep and say, Hey, can you give me a list of all properties that were bought and sold within a 12 month period in the last 12 months that were bought by an LLC? And he can send me that list. I can then pull up that list on a tax record and go, okay, well this investor bought it for this.
I can then go through the photos usually before and after because a lot of times they’re on market and go, okay, well they did this scope of work, which I think is going to cost about this much, and this is what they sold it for. I then can put it in a performa and I can see what their return was. And if I do that on five to six deals as a sample size, it tells me what my average returns in the market are. And so the thing is as we’re getting started and we’re new investors, that sounds a lot more complicated than it really is. They’re like, wait, what do you do? You pull this list, you get the data. Again, having the right partner and broker on your team is so, so important. And so if you’re a new investor going out and finding that broker that works in that space, they will pull all that information for you.
Or if you contact a broker that is selling a lot of flips in your market, they’re going to know what their clients are buying and selling things for and typically what their renovation costs are, and they’re going to help you explain that to you. And because you’re seeing the volume with them, you know that they’re involved constantly. And so if you’re new, I think the best thing you can do to figure out your market returns, find a specialized broker, not your mom, not your dad, not your aunt, not your friend. Find the broker who’s selling the most amount of flips and the most amount of investment properties. Contact them and that’s who you want on your team.

Ashley:
And where else, James, can you go to find an investor friendly agent?

James:
Well, one of the best resources you can have is the BiggerPockets broker finder because these are brokers that want to work with investors. But the beautiful thing is you’re finding a targeted broker that’s looking to work with investors. Our business, Heaton data real estate, we are a brokerage that is only services for investors. If Ashley came to me and goes, Hey, I want you to find my dream home. Can you show me 20 homes and let’s go look at ’em? We’re actually, I don’t work with that kind of client. I give ’em to somebody else. We work with investors. And so if you find a broker like us, that’s where we can speak the same language and we’re going, Hey, this is what you need to do to transact because that broker also has an interest in you transacting so they can make a commission, but they also have an interest in you long term with investment broker. Because for me as a broker, my clients are clients of mine for 10, 12, 13 years because they’re consistent buyers as long as I take care of them. And so go on BiggerPockets, find the brokers in your area, they work with investors, and then start interviewing them. And if they can tell you what the return should be, a good person to engage with. If they don’t know, they might not know your market like they should.

Tony:
And for those of you looking for that BiggerPockets resource, head over to biggerpockets.com/agent. You can find a good investor-friendly agent in your market. Now, James Masterclass on kind of the return analysis on a potential flip, but what I want to talk about now is actually choosing the market. Now you’ve got a really unique dynamic because you are in one of the more expensive markets in the United States. So for rookies that are starting out, I guess, how do you actually go about choosing which market you want to start in? How do I pick the right market to become a first time flipper?

James:
That is a really great question, right? Because we’re always trying to figure out the expensive markets that it’s hard. They eat up a lot of capital. Many times they have a lot more restrictions like Seattle. It is not only that our deals are expensive, the permitting process is so brutal and it’s so complex, it just takes a long time. And so for a newer investor getting in those expensive metro markets, it is you definitely want to have the right team around you. Or if you are in that market and you want to participate but you don’t have the resources, I then would partner with an operator to where you can start learning that market and learning those processes. That’s one of the best things that you can do. Now if you want to research the market, I’m starting to look into outside markets of where to flip.
Now for me, I do it a little bit more passively flipping. I actually find more experienced operators and try to partner with them in the outside markets rather than chase the market because I always for flipping, it’s all about the resources, it’s all about the skillset. It’s all about the experience. Because the more houses you’ve done, the more experiences you’ve learned. The reason I think I’m a fairly good flipper is because I’ve lost a lot of money and I’ve made a lot of mistakes and we’ve 18 years under our belt. So we’ve made a lot of mistakes and we’ve learned a lot of lessons and we’ve been able to change. But if you want to get into a new market, the first thing you want to do is shop your budget. What cash are you working with? And if you have 50,000, okay, well we have 50,000, then we need to go to a more affordable market.
Maybe Ohio is a great one to be in for or homes that are selling for under 300,000. That is my first thing. I got to shop inside the budget. The next thing I want to do is go, okay, where is the growth? One thing that has been super impactful for us on our flipping in our investing is we have growth in Seattle, we have population growth, we have tech growth, we have job growth. And that’s what really makes a market more stable for flipping. Because even when we go through market cycles, if we have that consistent economy and that consistent growth, we have less ups and downs and we have more stability. And as a flipper, stability is our best friend. Actually, appreciation is our best friend, but stability is really what we want. We don’t want to have these influxes, we don’t want to be sitting on houses for a long time.
We don’t want the markets to go down. And so first thing I would do is shop for budget. What can I afford? The second thing I want to do is what are the markets that are emerging? So I want to look at where’s the population growth, where’s the job growth? Where’s the highest income growth? Because as people are transitioning in, they’re making more money. Guess what? They want to buy renovated houses, and as they relocate, they want the best product. And as flippers, we can deliver that best product. And so I would look at population growth, demographic growth, and then your budget from there, then finding the right team because I would rather flip in a market I liked less if I had the right team around me, then a market that I really loved and had a team that I didn’t really have because Flipping’s built on the operations and the discipline is not just the market.
And so as a new flipper, I would really reach out, find out what are those markets that have the best teams in there that can help facilitate you? And especially if you’re going to flip out of state, that’s a hard business. I’m a backyard flipper. I flip everything that I can put my hands on and if I can’t put my hands on it, I partner with an operator so they can. And so if you’re going to flip out of state, you have to have the right boots on the ground or you’re going to be flying across country every week just to check on your job site. And so research the markets you like, what you can shop and what team you can build around you.

Tony:
James, lemme ask some follow-up questions to that because I agree on the team is one of the most important things when you’re doing the rehab work. But let’s say that I took James and I dropped you in the middle of, I don’t know, Kansas City and say that you can’t partner with someone else. You have to go out there and build that team yourself. So I dropped you in Kansas City, you’ve got no connections there. How would you actually go about building that team? What steps would you take starting from ground zero?

James:
Well, I did just have to do this, so I just flipped the house in Newport Beach. We just listed most expensive flip we ever did.

Tony:
I saw that 9 million,

James:
9 million bucks that we just listed for

Tony:
James when I saw that. So beautiful but so scary. Kudos to you, man. Because when I saw that, I was like, man, you got to have some guts to do a flip of that size. That’s amazing.

James:
Yeah. Now I needed to sell, but we’re getting good feedback. I think we priced it well. Yeah, the bad thing, the good thing about more and more expensive markets, they give you a lot of profit, but the bad thing is your whole times are brutal, right? Even when you’re leveraging 50% of costs, you’re still paying a lot in interest every month.

Tony:
And you shared this before too, even just a small shift in the purchase price, right? Like a 5% shift on a $200,000 home, very different than a 5% shift on a 9 million home. And there’s a lot more risk at those bigger numbers as well.

James:
Yeah. Can you imagine if that house somehow came down 10%, that $900,000, that would not be good.
And that’s the risk that we take as flippers, right? The one thing I did learn, and I want to get back to answer, how did I start over? Is as flippers and investors, I have learned I never should stop buying because the market’s always going to go like this. And what happens is a lot of times as we go through different cycles, investors lock up when they’re losing money. And the thing I’ve learned is always buy more because if I’m losing money, I can buy my way out of that because typically that means the market’s going into correction, everybody locks up and the deals get a lot better. And it is that discipline of just staying in the game. And so for anybody listening, if you’re having a hard time flipping burr, short-term rentals, whatever it is, you have to keep moving forward because if you’re having issues, so is the rest of the nation.
And that means that you’re going to have better opportunities. And a good opportunity is always a good opportunity and it is important. That’s why you have to have those good teams around you. How do you get started? Because I can always buy because I have the people that can execute it. Now, when you’re starting over, it’s a hard thing because it took me a little while. Even in Newport, I had to build a new team for this, but the first steps that I’m doing when I get into a new market is I’m finding a title officer, which sounds weird.
If you find the right title officer, they can point you in so many directions very quickly to get you in touch with the right people. So I had my title officer introduce me to his counterpart down in SoCal. That title officer introduced me. I said, Hey, I need six brokers that work with developers and investors. I don’t want open house brokers, nothing against that, but that’s not what I’m looking for. I don’t want a retail broker. That’s not what I’m looking for. And so they put me in touch with six different brokers. Out of the six brokers, I really liked three of them. And out of those three, I ended up transacting with one of them. And because those were the people that could start finding me the opportunities and also pointing me into the right neighborhoods of where I wanted to start flipping in that same broker that he connected me with also guess what?
Had a general contractor and a builder he could refer me to, which then allowed me to start building the construction and learning about cost and construction. So before I even bought a house and just started talking about buying a house, he introduced me to a builder and then I got to go walk sites with him because I got to get to know the market a little bit. Like what do things cost? What do people putting in, what are those expectations? Because I have flipped a lot of homes up in Seattle, and I know it like the back of my hand, Newport’s a different beast. If I go into Ohio, that’s a different beast of what I need to do. And so that broker then introduced me to the construction partner. That partner allowed me to start learning cost, learning the process before I even wrote the offer.
Because when you get into a new market, you have to know there’s certain that can crush a deal on a flipper. And it’s not just your construction cost, it’s your whole cost. If you buy a property in the wrong location and you don’t know the permitting process and you close on it and it takes you nine months just to get a permit to get going, that can be detrimental to a deal. And so this allowed me to start walking job sites to understanding costs and understanding process. I found out what I should not buy, and it crossed off 50% of the houses right away. And so it gave me clarity on what I was looking for. Now as I started learning that, I also started reaching out and networking with builders all around town and flippers all around town, getting to know them, talking to them, talking about deal flow, how can I help them in their business?
It was funny. I was going out and talking to flips like, Hey, how can I help you like an intern? Because again, it was a new market and so I wanted to learn. So I’m walking through job sites, but by doing that, they’re pointing me out to flooring suppliers. They’re giving me referrals to cabinet suppliers, countertop suppliers, and I’m building up that list. And during that time, as I’m looking for my deal, I’m learning my cost, I’m learning the specs, I learn how to control my budget and get access to materials that I need from there. I have a lot of the key components at that point. Then it came down to financing hard money in California is a little bit different than other states. It’s a little bit more regulated. The process is a little bit different.
And guess who my title rep referred me to? Three different hard money lenders there that I could start working with and talking to. And so first thing I do, find the title rep, then find the broker. If the broker can’t give you referrals for general contractors and where you should be shopping, not your broker, go find the next one. Then start understanding the market, start driving it, walk it, feel it, understand it. Then start digging in to the lending and the data behind that. Title Reps again are some of the best people to pull you data. My title rep down there pulled me every flip that was done within a three mile radius of where I was looking, and I could see what they paid, what they sold it for, and how long that took. And so by doing that, I really could understand the numbers, I could understand what a good deal was, and I could do this all in a 60 day period very quickly.

Tony:
Alright guys, we have to take our final outbreak, but we’ll be back with James in just a moment.

Ashley:
Okay, let’s jump right back in. So Jimmy, now that you’ve built your team and you’ve located your new market, when you get this property under contract, what are the steps that you’re taking to actually build out your scope of work and to plan for the rehab? Do you have any kind of template or checklist or flipping framework that you’re following as you approach the rehab process?

James:
Yeah, you always need a framework for your process. I think that is one of the most underrated, skipped steps from investors. And I think if you’re an investor that’s going way over budget on your projects, it’s because you’re not having clarity in what you actually want to do when you’re giving the original scope to the contractor. And so one thing, and we’ve been involved in over 4,000 flip transactions in the last 18 years, and so we have a lot of experience. We can walk through a house, I can kind of look for things, but that doesn’t mean that I don’t miss things. I miss things on the regular. I mean, Ashley knows me fairly well. I get very a, DD, I start popping all over the place like a good salesperson would, and I’m getting distracted. Then you got to shoot some social media content to tell people what you’re doing.
All these things are disruptive to your business. And so I’m very disciplined with the checklist. We have a detailed scope of work that goes, okay, we need to check these things and do they need to be replaced from the electrical panel to the outlets, to the flooring? Where does the flooring go? Windows? How many windows do I have to replace? And so by having this checklist, it trains my brain to go through and check all those spaces. And by having a detailed scope of work and a detailed scope of work on a checklist is really just anything that you need to do on a renovation. We have it in check boxes and I can go through check and make notes. It keeps my brain focused on the house. And by compiling into that scope of work, then I know exactly what I need to do at that point.
And so having that checklist is really important. If you’re a newer investor, I think one of the things that you should do is if you don’t know about construction, which you won’t know about, estimates, you don’t know what to look for, because a home inspector is not going to be able to tell you what it costs to renovate the house. And when you do this walkthrough with a contractor, bring the comps of what you’re trying to achieve so they can see exactly what you’re trying to do, what needs to be replaced, and you can see the materials that are going in, where the bedrooms are, where the bathrooms are, what the primary bath needs to look like, and give them clarity with that. That will help you get your scope of work created by having the professional come out with you. Now, as you get better at this and you do more jobs, you can take these estimates and you can start to break those down.
So what we’ve done is we have our walkthrough checklist, but then as we’ve gotten estimates from contractors, five estimates, 10 estimates, we can go through and start calculating what’s the average that they charge me to install flooring? What’s the average that they charge me to install a light fixture? What’s the average they charge me in a rewire house? We’ve taken all those averages and we’ve put it into an Excel spreadsheet. So I can go through and just type in the square footages, how the accounts are, where it’s going, what the square footage is, and it kicks me out in estimated budget based on my historical install rates. From there, it’s just about me selecting the materials and we can create a very detailed scope of work and estimated budget that we are almost 98% hitting on almost every one of our projects. So it’s really about just taking the data that you get and breaking it into a sheet to where you can actually calculate the align items.

Ashley:
And what James is explaining, anyone can do this, this is not some crazy Excel Smartsheet that is being built here, is you are taking whatever the expertise is or the job. So for example, painting, we’ll use that. You’re putting painting and you know that the contractor you use charges say two 50 per square foot. So you’re going to put that as the line item. So then you’re going to calculate that, okay, the house that you’re looking at is 2000 square feet. You’re going to plug that into another column and you’re going to have the formula set. So it’ll do 2000 times two 50, and that will be your output as to how much it’s going to cost for the painting. And you’ll go through, and you can do that for flooring, for tile, for a bathroom on average, say a small bathroom, a medium bathroom, a large bathroom.
I know James, you do that for kitchens as to like, it’s going to be a small kitchen, medium kitchen, large kitchen. And then you also do it based on upgrades too, as to what kind of countertops are we using, things like that. Are we going very high end? Are we going low end? And this is something that you can build now even before you actually do your first property, whether you’re doing a rehab on a rental or a flip is start to build this out. Look at what other people are paying in your area. Ask other investors. Go into the BiggerPockets forums, go to Lowe’s or Home Depot and look at the signs they have in the store that say, we will install flooring for 3 99 per square feet. Use that as an estimate, a starting point. It’s at least something. So worst case scenario, you’re having a Lowe’s contractor come in and install your flooring, and that’s actually who I use for all of my flooring. He does all of the Lowe’s contracts. So you can start to build this out now, and as you go through, it’s going to make your life so much easier building a more and more accurate scope of work and a budget for your property too,

James:
Because it is so overwhelming when you first start, right? There’s so many things that go inside of a house. Now I’m kind of a house nerd, I’m a construction nerd, so now it’s just like everyday work for me. I can look at a house and be like, oh, this costs this, this costs this. But I did not have that 18 years ago. And one of the biggest mistakes I made as a new flipper was not knowing my costs before I bought a deal. I guessed because some investor told me that sounded about right, but I had no idea what my costs were. And so the best thing you can do if you want to get started flipping for knowing your cost is take. If you see a certain type of product that you’re targeting, let’s say a cosmetic fixer, but a cosmetic that needs windows, roof, and then a full update with cabinets, flooring, doors, tram, all the things, go have three contractors bid that house.
Those three bids are going to be three different numbers, and they should be very similar if they work with investors in general. And then take that square footage divided by the bids and it’s going to give you an average price per square foot for a cosmetic renovation. And then you can do the same process on maybe a major fixer where you’re replacing all the plumbing, all the electrical, all the mechanicals, and you can do three bids, then divide that by the square footage, get the average price per square foot. And so when you’re looking at a deal, you can go, okay, well based on what I saw, this house was very similar to this. It needs this scope of work. The quotes I’m getting are 70 bucks a foot, so my budget should be this. And you can do it in a very, very simple way.
It’s a matter about just putting in the work and doing the work and bringing the contractors out to the house. And no matter what it is, don’t worry about whether you’re buying the house or not. The contractors are earning your business to get the job. You’re trying to find a good team. It could be a listed house, call the broker, Hey, can I get three estimates before I submit my offer? Go get those estimates, do it again. And then that gives you that baseline for understanding the costs in that market. I’m going to do the same thing. I just moved to Arizona. I will be doing the same thing in Arizona as I start buying there because I at least need to understand the baseline and then I’ll start working backwards for those core costs.

Tony:
James, that was the question I was going to ask, and you touched on it a bit already, but if I’m a rookie again, and I’m doing this for the first time, I just wanted to make sure that the sequence of events for the listeners was clear. So you’re saying you should actually try and get these bids before you’re under contract on this property, not necessarily trying to do all of this during your due diligence phase. Is that what I’m hearing? And I just want to make sure I’m clarifying for the listeners?

James:
Well, I think it depends on professional courtesy a little bit too and where the deal comes from and how flexible they are with that. I am a person that if I say I’m going to do it, I follow through on it even if I regret it later, but I’m like, I already told the person I committed to the person, so I’m going to commit honor this commitment. And so what I also don’t want to do is ruin my name in the market of tying up houses and then letting ’em fail on inspection. I don’t understand my numbers. Now, if you have a great deal, always secure that deal, but what I would say is know your cost and don’t waive inspection before those costs that go in because you can buy. I mean, in 2007, I bought an amazing deal, but I didn’t know what I was doing and I ended up losing all my money on that house, and anyone else that was experienced could have made money on that house.
But because I didn’t know how to control those costs, what my costs would be, that’s how it got ran way out of control. And so you can secure the deal. You don’t have to, because my thing is when I’m getting started in a new market or learning this, I want to get going right away. For me, it could take 30 days just to get a deal under contract, whereas I’d rather just start going to a listing that’s active where the broker will let me in and get that going in the first five days because that’s going to help me get a deal faster. I understand my numbers, and so don’t let securing a deal be your excuse of why you can’t do the work. Just do the work and start understanding your cost, then it’ll be a lot easier to secure deal.

Ashley:
So James, before we wrap up here, let’s talk about the dispo of this property, the getting rid of it, selling it, putting it on market. What are maybe three flipper tips that you have for a rookie investor as to the rehabs done, the projects ready to sell. Here are three things you should do when you’re putting your property on the market.

James:
You want to make sure you’re delivering the right product to the market because you’ve already taken on the risk you’ve bought in the house, you’ve went through the renovation, whether it was 30 days or six months, you’ve done all the hard work. And then what happens is this flippers, we want to get on market, make our money, and we start rushing that final detail. You do not want to do that. So for us, it’s really important in Seattle that we have a good brand, that we have a good product because not all flippers are built the same. Some people don’t do as high renovations. They don’t take the care in consideration. That’s why flippers have a bad name. And so naturally, your buyer’s going to walk into the house, they go, this is the flip, and they’re going to be a little bit nervous because of all the horror stories that have been heard.
And so what we want to do is make someone comfortable not only with our finishes and our approach, but that they’re buying a good house. So for us to ensure our sale quickly, we want to show the buyer that we care. How do we care? We get a pre-inspection done no matter what some flippers will say, I don’t get a pre-inspection done because I don’t want to know about any problems. I have to disclose ’em. I’m a flipper that goes, I want to know the problems, so either at least I can tell the sellers there or I can go fix it prior. So we always have a pre-inspection done where the home inspector comes out, they run their whole pre-inspection report at the same time. We do our own punch list where we go through and we make our own punch list report. We are blue tape in the house.
We’re taking photos of anything that we see is wrong, and we put it into a picture report for the contractor. Once the pre-inspections done and our photos report’s done with our punch list, we then leave it for the contractor to then go through it. We then meet that contractor on site once he’s done and walk through and check every one of those pictures off every one of those line items off so we know that the buyer is getting a good house. The second thing we do is we want to make sure that the property feels good. So we stage every house. Now, some people will say they don’t, and I understand why, especially if you’re in a more affordable market, they have standard floor plans, you might be in more of a track home community. It’s pretty easy for a buyer to envision. So sometimes they don’t want to stage For me, I don’t want to have any sort of objection when I’m selling a flip house because I’m selling a home with very expensive debt on it. Every day that goes by can cost me three to $400 a day with the pricing that I have. I want to make sure that the home feels good, it’s staged, it’s warm, the temperature’s set at the right temperature, and that it’s very, very clean. The last third one that we always do is we make sure that the home is on constant maintenance to where the property’s always well taken care of buyers show up yards tight, the yards weeded and edged, and that a buyer feels really good as they’re walking in. So first impressions.

Ashley:
Okay, so James, why don’t you tell us where everyone can find your book. If they want to learn more about the flipping framework,

James:
Well go to bigger pockets.com. And yeah, the new book’s called Flipping Framework where we break down all the basics of flipping from finding the deal, building your team, interviewing contractors, sourcing the money. It’s an A to Z process of flipping and how to grow and scale it. And so go to biggerpockets.com and get your order in today.

Ashley:
Well, if you want to learn more about James, we will link his information and also a link to his new book in the BiggerPockets bookstore. You can also find him on the market and also all over Instagram at j Dane flips and all over YouTube at Project. Well, James, thank you so much for joining us. And I’m Ashley. He’s Tony. And we’ll see you guys next time on Real Estate Rookie Podcast.