Page 31 - From Ghetto to Gucci: The Basic Principles of Flipping Houses

Crunching the Numbers on What you Can & Can’t Afford

Before you can start investing, it’s absolutely vital that you sit down and figure out what your
ability to invest is. This largely involves sitting on the floor, creating numbers from the top of your
head. Then, you put them on a dartboard, and then look for a dart. Get your dart, blindfold
yourself, and throw the dart. Wherever it lands is the amount that you’ve got available to invest.

No! Of course not. But that’s basically the approach that people use to plan their investment.
“Oh, I think I’ve got this much available,” they say. And then they get into a project and find
themselves spending much, much more than they had ever planned on, or unable to spend
nearly as much as they thought they could. I need you to repeat after me: “I will be honest with
myself about my finances.” Go on. “I will be honest with myself about my finances.” And again, “I
will be honest with myself about my finances.”Being a successful flipper involves knowing where
you are financially, and what you have available to invest.

Investing Worksheet

Take out the “Investing Worksheet” from your book, and go over it with me now. Look over it.
You’ll notice that there are three big questions:
● What are my monthly expenses? Use the past three months’ average expenses
o Housing: rent/mortgage
o Utilities/month
o Health insurance
o Entertainment costs
o Transportation costs
● What is my salary every year?
● How much of that is take-home pay/how much goes to my savings account?
● What are my liquid assets? What are my non-liquid assets?
● What is my rainy day fund?
● What amount do I need to save up for a six-month cushion?
● What amount do I have left over, with liquid assets minus cushion?
● What amount do I have to invest? 80% * Left-over

Good, now you’re ready to go through and fill out this worksheet. Be honest with yourself.
Estimate that you have less money available, not more. Be honest with yourself!

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