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House Flipping: 5 Vital Tips for Success (Based on My Mistakes!)

House flipping can be a lot of fun, right?

You get to turn something ugly into something beautiful.

You get to hone your design skills and impress your friends.

And, let’s be honest…

You can make a lot of money.

But house flipping is not as easy as the TV shows make it seem!

You know that, right?

Good! You are already farther along the path than most flipping newbies.

House flipping can be fun, challenging, and profitable — but it can also be dangerous. Many people have gone bankrupt because they decided to get into house flipping.

I’ve lost money on flips that didn’t turn out the way I wanted.

It sucks.

However, like any business venture, practice makes perfect.

Ok, that’s a lie. You’ll never be perfect at house flipping. But at least “practice makes better.”

Today I want to talk about five vital tips for house flipping success that I wish I had known when I first started on my house flipping journey. Knowing these would have saved me hundreds of hours of wasted time and thousands in lost dollars.

Let’s make sure you avoid that and find incredible success on your house flipping journey.

But first…

*** Hey, you! Yes, you! If you are reading this post, you must like the idea of house flipping. If so, I want to invite you to this week’s BiggerPockets Webinar, How to Analyze a Fix and Flip Deal (And Avoid Getting Burned!). We’ll be talking about the best ways to do the math, which is tip #1 on this list! Hope you can make it! And now back to the post!)***

Okay, let’s get to the five vital tips for house flipping success

1. Understand the Math Behind House Flipping

Before the paint colors, before the new countertops, before the demolition…

There is the math.

The math is like a crystal ball, helping you see the future.

It shows you the right improvements to make.

It guides you to the best neighborhoods.

It helps you know if you will succeed or fail.

However, so many people struggle with the math. They see a dilapidated house and start thinking about all the beautiful things they could do to the house, but they don’t see the math behind it. Does it really make sense, financially? Is this house really going to provide a great profit? Should you really do this flip?

The math helps you answer those questions. The math helps you gain confidence. The math helps you avoid mistakes.

The math is not as simple as the TV shows make it seem, but it’s also not rocket science either. It’s simply a matter of knowing ALL of your expenses and subtracting them from your ultimate profit.

There are many blog posts here on BiggerPockets about analyzing a flip so I’m not going to dive deep into the topic here. Besides, I’m doing a 90-minute LIVE webinar on this very topic this week. (Can you make it? If so, click here to register.)

Also, if you are not using the BiggerPockets House Flipping Calculator… you are missing out. Seriously, it’ll save you a dozen hours a month analyzing deals!

(click to continue reading on BiggerPockets)

7 Timeless Lessons About Getting Rich From a Book Your Grandparents Read

 

[This post originally appeared on Entrepreneur.com.]

Two major books were published in 1926 that rocked our world: Winnie-the-Pooh and The Richest Man in Babylon.

Although “stuffed with fluff,” Pooh Bear might have had a larger impact on American pop culture, but it’s The Richest Man in Babylon that has made a massive financial impact on untold millions of readers, myself included, over the past 89 years.

Written by George Samuel Clason as a collection of parables, The Richest Man in Babylon is a unique book that lacks a central storyline and a reccurring cast of characters. Instead, the book is a collection of stories about one thing: building wealth. The book seeks to answer the question: If wealthy people have the same 24 hours in a day, and work just as hard as others, how do they acquire such incredible wealth?

Can wealth creation be taught? According to Clason, yes!

In one of his parables, Clason tells the tale of Arkad, a merchant and the richest man in the city of Babylon. The king of Babylon asks Arkad to share his wisdom with 100 students in an effort to increase the collective wealth of the population.

You see, the same problem existed in ancient Babylon that existed in 1926 and still exists today: most people are broke. Clason refers to this “broke” condition as having a “lean purse.” To cure the problem of having a lean purse, Clason, through the story of Arkad, offers the following seven lessons:

1. Start thy purse to fattening.

Arkad, the richest man in Babylon, asks a very simple math question to his students: What would happen if, every day, you added 10 coins to your purse but only spent nine? The obvious answer, of course, is that wealth would increase by one coin each day.

Therefore, the first step in building great wealth is to simply set aside one coin each day. Specifically, Arkad instructs his students to set aside 10 percent of their earned income, which I think is a great place for anyone to start.

(click to continue reading on BiggerPockets)

Goals and Resolutions Will Make You Broke and Depressed. Try This Instead.

I want six-pack abs.

That’s right, I said it: Six. Pack. Abs.

You know, the kind that superman and David Hasselhoff have.

Oh, I also want a million dollars in my bank account. Oh, and while we are at it, let’s throw in an airplane, too. Grant Cardone has one, so why not?

These are all fine goals to have. And they really are goals for me.

But guess what? They are mostly worthless.

And, in fact, they might be worse than worthless.

They are dangerous.

Goal Setting Will Make You Broke and Depressed

There is one major thing getting in the way of my six-pack:

I like cake.

And cookies.

And pizza.

So every year I tell myself, this is the year I’m finally going to get my six-pack. I’m going to say no to the cake. I’m going to work out. I really want to get in shape.

But then I eat more cake.

And cookies.

And pizza.

And I don’t get that six-pack.

So I get depressed. And I eat more cake. And I get more depressed.

Now, maybe you don’t care about cake. Maybe you want something else.

Maybe this is the year you are finally going to quit your job! This is the year you are going to start your own business. This is the year you are going to buy your first rental property.

But then you eat more cake slack off.

You lose the momentum.

You can’t find a good real estate deal.

Your business partner flakes out on you.

You lose the fire.

And you get depressed.

Maybe, in an effort to accomplish those goals, you spend a bunch of “hype money.” Someone, somewhere, convinces you that the fastest or best way to achieve your goals is by purchasing some kind of product or $10,000 course or boot camp.

So you spend the money, thinking it’s going to help you.

You equate spending money with taking appropriate action.

But it doesn’t.

It just makes you broke.

And depressed.

Or let’s go back to the example of buying your first investment property. You really want to buy it. You know that buying rental properties is going to be your ticket to generational wealth for your family.

But because you are so focused on your goal of buying that property, you don’t buy the rightproperty.

You spend too much.

You didn’t run the numbers right.

You buy a bad deal.

And so you get depressed. And then you go broke.

And it’s all because you were so focused on this “goal” that you needed to hit.

Because here’s the truth you need to understand.

Are you ready for it?

Here it is:

Goals are not enough.

(click to continue reading on BiggerPockets)

[This post originally appeared on Entrepreneur.com.]

Today, I want to say something a little controversial: The business you are building may be the wrong one.

Yes, I know you’ve spent hundreds or thousands of hours on it. But, I’m here to tell you that it might be the wrong business for you. As the famous quote from Stephen Covey goes, “If the ladder is not leaning against the right wall, every step we take just gets us to the wrong place faster.” So, how do you know if your idea is heading up the ladder on the right wall?

Do you simply start climbing and see what happens? I don’t believe so. Not only will you be wasting years of your life that way, but you’ll wear yourself out in the process.

So, here are the three vital questions every entrepreneur should ask about the business he or she is trying to build. If you ask them of yourself, and then answer them honestly, you’ll be sure that you’re climbing the right ladder.

1. Do I want to be doing this in ten years?

Remember the first few months of your last girlfriend or boyfriend? The fun, the excitement, the giggles? This is often known as the “honeymoon phase” and it’s great but it’s not real.

What’s real is the life that comes after the honeymoon phase, when emotion is not the driving force that makes or breaks the relationship. The same is true for business ventures. Every business is exciting in the beginning, but let’s be honest: None of it is real. The feeling won’t last.

Related: What the Classic “3 Little Pigs” Fable Can Teach Us About Building a Business

Many people start businesses because they believe they’ll become rich. And, truth be told, many businesses do make their owners wealthy. But what most wannabe entrepreneurs fail to grasp is the absurd amount of time between starting a business and exiting that business. It’s usually not six months or a year. It’s more like a decade, or longer.

(Click to read on BiggerPockets…)

Perhaps your ultimate goal is to abandon your job, say “screw you!” to your boss, and never look back.

But let’s be honest: That’s probably not happening today.

It might not happen for a few months, or maybe years.

But that’s not a bad thing. In fact, it’s totally possible (and maybe even beneficial) to keep your job while you build your business.

There are plenty of ways to quit your job. I happen to favor real estate investing, but I get it: Different strokes for different folks. A lot of my examples in this post will be about real estate. But if you are trying to build the next Facebook, I still believe these tips can be life-changing.

I believe these tips will make life far easier as you build your business WHILE working your full-time job.

And by “easier” I don’t mean “easy.” It’s going to take work. It’s going to take hustle. It’s going to take smarts.

And it’s going to take YOU following the following five (and bonus #6) to get there. So let’s get to the list.

5 Life-Changing Tips for Growing a Business While Working a Full-Time Job

1. Take Inventory of Your Free Time

I know what you are thinking right now:

I don’t have any free time. 

Yes, you probably are incredibly busy. I get that. But what are you busy doing? What’s taking up all this time?

If you are looking to invest in real estate while working a full-time job, the first thing you need to do is take an inventory of this time. Actually pull out a piece of paper (go ahead, I’ll wait) and write it all down.

Sure, your job takes time. Probably forty hours a week.

And then you have your commute — probably another ten.

Of course, you need to eat meals, which is probably another ten.

And then sleep, which accounts for another sixty hours a week.

(Click to read on BiggerPockets…)

Class A, B, C & D Real Estate: How to Know Where YOU Should Invest

(The following is an excerpt from the new book from BiggerPockets, The Book on Rental Property Investing. If you are looking to buy more rental properties this year,pick up a copy today!)

As you begin investing in real estate, you’ll likely hear people talk about a property being in an A, B, C, or D location.

Just like your high school class grades, a neighborhood can receive a grade, though the classification is a bit more subjective than a simple high school test. There is no government organization, board, or company that classifies locations.

It’s honestly more of an unwritten rule accepted by most investors, and the lines are not incredibly clear. You might think a location is an A location (the best), while I might think it’s a B location (second best), but for the most part, investors will agree on the class distinctions.

Some investors grade locations on an A through C scale, whereas others grade on A through F scale. In other words, you might say a location is a C location, meaning that you think it’s the worst, because you grade on an A through C scale; at the same time, someone who grades on an A through F scale might think it’s pretty middle of the road. For the sake of our discussion in this chapter, we’ll use an A through D scale, which is probably the most common grading scale.

Related: How to Identify A, B & C-Class Areas (& How to Know Which You Should Invest in!

In addition to the location receiving a grade, the property itself can be classified as an A, B, C, or D property. So you might hear someone say, “I have an A property in a B area.” To add more specificity to the classification system, some will add a + or – to those grades, so you might hear “The property is a B- house in a B+ area.” I’ll leave out the + and – designations in this chapter, but you can always use them if you want to get fancy or more specific.

Let’s take a minute and talk about the different classes of locations and property types.

Class A Real Estate

A Class A location is an area that has the newest buildings, hottest restaurants, best schools, wealthiest people, and highest-cost real estate. This is truly the best location you can find, and the highest-quality tenants are looking to rent here.

A Class A building follows the same concept. It is generally newer, probably less than ten years old, and therefore has fewer maintenance issues. The building has modern amenities, such as granite countertops, hardwood floors, and other in-demand features. Class A properties generally command the highest rent but may provide a lower amount of cash flow, because of the high-demand for an “easy investment.” More demand, higher purchase cost = lower cash flow.

(click to continue reading on BiggerPockets)

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