If you have decided that you want to try your luck at flipping houses the first thing that you need to do is sit down and write up your business plan. Think of a business plan like blue print for a house. You would never just decide on day that you wanted to build your own home from scratch without a map to follow and refer to from time to time, so why should your business be any different. People everywhere are deciding that they no longer want to have to deal with the stress of a nine to five job and they are opening their own small businesses, nine times out of ten it is the people that take the time to do the important first step of planning that makes it past their first year.

A business plan can be a simple or as complex as you make it. You are going to want to clear your mind and be ready to think outside of the box. Begin with thinking about what you hope to achieve by getting into the house flipping business. If you are attempting to make flipping your primary source of income than your business plan is going to be more involved then it would be if say you were just looking to make some extra vacation cash. Once you know your ultimate goal you have to know where you stand financially. If you are not secure enough to reach your end goal right away you have to note the steps that you are going to need to take to get you to the finish line.

The next important part of the business plan is deciding what kind of properties you are going to go after. Do you want a house that you will have to do nothing to in order to relist on the market, or are you looking for a project home? Once you decide then start shopping. Take a moment and write down all of the attempts that you make trying to get the property, even the failed ones, if you can look back and see what worked and what didn’t then you will save yourself a lot of time in the future.

By: Alex Nghiem

About the Author:
Learn More About Real Estate Wholesaling Download the FREE Wholesale Manifesto Now: http://www.wholesalingmanifesto.com/members/

Alex Nghiem is the co-founder of several Real Estate investment websites and is a well respected coach. His latest project is the just completed Wholesale Manifesto. Learn All about – Real Estate Wholesaling and Flipping Here.

There’s a source of some debate about whether private money is better suited for a ‘buy and hold’ approach or a ‘flipping’ strategy for real estate investing. Real estate investors correctly point out that their private investors will want to exit (or the availability of exit) from their investment at a future date, which could cause financing issues with the project.You don’t want to mess with a good thing if you have a nice cash flowing property. So, which is private money best for: flipping or holding?

First of all, you shouldn’t think in terms of either/or. You can successfully flip and hold properties with private money. How you structure the deal, though, will determine the extent of your profitability with each.When it comes to flipping, turning properties over quickly can generate healthy profits for you, but you must be careful to pay your private investors an appropriate rate. Set it up so that you pay them an ‘annualized’ return on their money. Here’s an example:Private Money Investment: $100,000

Annual Interest Rate: 10%

Deal Profits: $25,000

Money Invested for: 45 days

Cost of Funds: $1,250

*The cost of funds should not be total points on the amount borrowed – is should be prorated annually.

In the above example, you are borrowing private money to buy and sell the property, you are making a net profit of $23,750 after you pay your investor $1,250. While this may seem disproportionate in your favor, the investor still got a great return on their money. You must protect your profits. Too many real estate investors would be willing to give up more than necessary on this type of deal – you don’t have to if you know how to set things up with the investor at the outset.

You can impair profits if you finance a long term hold with a private investor who has a 3-5 year time frame. If you plan on holding it for the rest of your life (and your kids’ lives) then it isn’t far fetched to consider buying your equity investor out with your share of the cash flows (it nets out to be the same cash on cash return for you) or setting up the note to be amortized, where you pay off part principal and interest each month.

However, private money equity partners are better than lenders for buy & hold properties. The investor comes into the project as a profit sharing partner with you and, thus, you both have the same time frame for investment going in. Many private investors would welcome a buy and hold investment, as it reduces their worry about how to turn the funds over when the investment redeems.

Private Money Re-finance

Another option to use on buy and hold with an investor that has a shorter time frame than project length is to replace their funds with those of another private investor. It can be much easier to bring a new private investor into your business on an already performing project than an altogether new investment. Keep this in mind to bring in new funds continually. You can set up the deal so that down the road, one investor can sell their interest in the project to another private investor or they can sell the note. Take care to structure your promissory notes so that they can be sold from one investor to another or set it up so that one investor pays off the note and another investor re-loans you the money. Think of it as refinancing one private investor with another, just like a bank would do.

The best thing about working with private money is the financing flexibility you achieve with it. As long as the returns on there for you and the investor, everybody wins.

By: Adam J Davis

About the Author:
Adam Davis is a real estate investor, author, speaker and founder of Ultimate Private Money. He teaches real estate investors how to raise capital from private investors. Adam has completed hundreds of real estate deals- from single family house flips, lease options to apartment buildings, land contracts and hard money loans – all with none of his own money. All told, he has raised millions of dollars from private individuals to finance real estate deals. For a FREE audio program on how to get private money go to: http://www.UltimatePrivateMoney.com.