How do you find deals like this?
Contrary to what people may tell you, deals are everywhere. That doesn't mean they're always easy to find. But if you're persistent in looking, you'll find them.
On this particular deal, we just happened to be attentive to what the previous owner of our house told us. He mentioned the owner across the street was looking to sell, and we knew we needed to talk to him.
One of your first steps to finding deals is to let people around you know that you're looking to purchase a house that needs some work. Tell them to contact you if they ever hear of anyone looking to sell.
In addition, you can start proactively reaching out to people in neighborhoods you'd like to flip in. Drive up & down the streets. Look for people outside. Pull over & talk to them. Let them know you're looking to buy in the neighborhood & ask if they know of anyone interested in selling. Then go talk to them. Don't be intimidated by this. My wife is an introverted person and she's done this for years & we've found many homes this way. Most people are glad to talk about their house & the houses in their neighborhood.
How did you know what to offer?
We didn't initially. We needed to do some research. My wife was a Realtor but she was used to helping people buy/sell houses in retail condition, not houses like this one. So, we were newbies at pricing investment properties like this one.
If you live in a non-disclosure state (where the sold prices of homes are not public data), it's best if you can ask a friend who's an agent if they'll run some comps for you. Offer them a flat fee for running the comps or tell them you'll refer people to them that are looking for a Realtor. Let them know you'd like to see a list of all the home sales in that neighborhood over the past year (past 6 months are most accurate).
I'd keep it really broad & then you can narrow down by square feet, beds/baths, condition, etc to find ones that are similar to yours. This will help you see what you could sell it for in as-is condition and what you can sell it for in updated condition (depending on how you flip it). Once you know this, you can pull out the minimum profit you want to make along with the closing costs you'll have when you go to sell it (also repair & holding costs if you plan to do some work to it). That will give you a good idea of the range you need to be in.
If you live in a disclosure state where home sales are public, you can use a site like Zillow or Redfin to do this research yourself. You'll be able to see the homes that sold in your area in the past year and you can apply the same system as above.
To check your work, you can always call your Realtor friend back & say, "Hey, if I offer _____ for this house, do you think that's a good price?" That will tell you if you're in the ballpark.
How did you know how to put it under contract?
We were familiar with real estate contracts because my wife was a Realtor & we had bought and sold our own home multiple times. But, if you don't have real estate experience, no big deal. This blog might help — "What If I've Never Filled Out a Contract Before?"
How did you get the money to buy the house?
We primarily Quick Flip now (I would recommend this if you're just getting started), which doesn't require purchasing/holding property & finding financial partners. But, when we first started, we were doing more Lipstick Flips & Full Fix & Flips which did require financial partnerships.
As this community knows, I'm a no-debt guy. The only way this was going to work was for me was to find a partner who would invest in the deal with me. Not loan me money that I owed them, but an actual investor in the deal who gets paid based on the profit of the deal.
There are many people out there that would likely work with you in this way also. Perhaps family members, friends or other people you may know looking to get a good return on their money.
My Dad was excited to put some of his money to work and so we partnered together in the early days, splitting everything 50/50. I found the deals & did all the work. He funded the deals & took the financial risk. Since I Quick Flip 95%+ of our properties now, I don't need this financial partner, but when we take houses down & do other types of flips, my Dad and I still work together. Once you get experience in flipping houses, you can find financial partnerships that are better than 50/50 without the debt-risk as well.
Why did it take a month to close?
Once you & a Seller sign a contract & deliver it to the title company, it takes time to complete the transaction. When financing is involved, like in many retail transactions, it can even take more than 30 days. You should assume if you buy a house to flip that it will take approximately a month to close. Sometimes title companies can speed this up if everything is in cash and you've got a strong relationship with them. For example, our title company will close for us in a week or two when we need them to. But 30 days is a safe estimate.
How did you decide what type of flip to do?
Again, we didn't even know about Quick Flips at the time, so really we were choosing between a Lipstick Flip & a Full Fix & Flip. Since the Lipstick Flip seemed easier and less risky, we went that direction for our first one.
How should we sell a flip if neither of us are Realtors?
I always encourage people to start by trying FSBO (For Sale By Owner). Many people are looking on Zillow for houses these days, so you can list yours there & possibly find a buyer that way. Then, you can stick a sign in your yard that you buy from Home Depot. This way you have absolutely $0 in real estate commissions, which is ideal.
If you have trouble selling it by owner & you want to go the Realtor route, look up Discount Brokerages in your area. They will often list your house for a flat fee, like $500, rather than 3%, and then you're only paying one agent 3% (the buyer's agent) and not both agents (a full 6%). That could save you thousands! Start with FSBO, then go to a Discount Brokerage if you want MLS exposure.
And if you or your spouse ever becomes interested in getting a real estate license, check out How Realtors Make Money.