In a previous version of this post, I only focused on the potential features that you might need to understand when evaluating house flipping software, instead of starting off with explaining why you might need them.
In this improved guide to choosing the best house flipping software, I aim to help you in your decision process from the perspective of scaling your business first, and only then talk about the features that you might need in order to get there. There is actually significant overlap here between software for house flipping and wholesaling, and for good reason: The hard work is on the front end.
With this, much more focused guidance, I want to truly help you make an educated purchase decision in the goal of making your business successful.
So many choices, so much hype, so little value…
If you are looking online for real estate flipping software, or a real estate investment app, you may be wondering how to choose from the many software providers that are available.
Many real estate investment apps claim to offer similar features, but unfortunately there are so many exaggerated claims out there, that it requires looking much more closely under the hood to determine where the value lies, and usually it’s correlated to price and data.
Since you can’t get something of value for nothing, the old adage of: “you get what you pay for” applies here as well, and if you pay very little or nothing for your software, you should expect to get nothing of true value in return.
Then there’s the hype of “all-in one software” that says it does everything. This unicorn does not exist. If it did, it would cost you tens of thousands of dollars and none of us would be able to afford it.
I wrote this guide specifically to help you choose based on what is important for scaling your business right now, so that you can choose the most appropriate home flipping software to solve for that immediate pain.
This is in contrast to the classic mistake that most people make, whereby they choose software based on what they think they might need in the future, solving a business problem that they don’t actually have yet. This is called premature optimization and is huge waste of your time at a critical point in your business.
So let’s begin.
First define the problem
Before you can evaluate the best flipping software for you, you first have to take stock of where your business is currently, and the problems that your business needs to have solved right now.
90% of the pain in this business can be split into 4 major areas of focus:
1) Not enough leads to turn it into a business
2) Business killed by poor profit margins and lost money due to completely inadequate time and effort spent on deal due diligence and deal selection
3) Inability to finance deals because of 1 and 2
4) Inability to move inventory because of 1, 2, and 3
What about managing my projects?
Are you working in the business or are you working on the business? If you’re doing it right, then you’re working on the business.
If you’re doing 1-10 deals at a time it does not mean that you need to worry about project management software. What it does mean is that you haven’t yet done your one job as CEO: to fill your deal pipeline.
Think about it this way: Say it takes 1,000 leads to make 10 offers to execute on 1 project that will make you $20,000. How many leads do you need to contact, nurture, and convert to make $100,000 this year?
If you ARE doing more than 10 deals at a time because you have solved getting enough qualified leads, and you are choosing your deals wisely to ensure profit margins in these tough times, then congratulations: you do not have time to manage the day-to-day of what your sub-contractors are doing in project management software.
Instead, at this point you should have outsourced your project management to professionals who already use their own tools and report to you the status of the project.
For those reasons we don’t offer project management as part of the software. Now if project management IS your problem, then you should not be looking for house flipping software. You should be looking for project management software, and I have some recommendations for you:
Just starting out?
If you’re doing less than 10 deals, you can download a free Smartsheet spreadsheet here: Smartsheet Construction Project Management Templates
Managing your own projects?
As a certified project manager for well over a decade, I can tell you that you simply can’t get any better than Microsoft Project on Windows and OmniPlan for the Mac.
Looking for collaboration?
* None of these recommendations are affiliate links. They’re just what we’ve been using for years.
So let’s talk about the ways that you might solve 90% of your problems.
Do I have more leads that I can handle?
No? Your number 1 priority is to figure out lead generation.
Am I 100% sure that my profit margins are defensible via extensive deal due diligence?
No? Stop using incomplete Zillow data to make decisions worth hundreds of thousands and spend a few hours not minutes making your due diligence rock solid so that you have proven beyond any doubt that you should do the deal.
Am I confident that if I can come up with the next deal that I can get it funded?
No? Make your deal pitch rock solid, and show all of the data points necessary to prove that the lender should underwrite the deal.
So let’s get to work. What do you need to make it happen?
Step 1: Lead Generation
If you’re trying to build a house flipping business based off the MLS then you have a pretty significant margin problem from the beginning. In these tough flipping markets, smart wholesalers have the advantage, and so for you to flip right, you have to learn from the wholesaling playbook or think about going home.
Whether you are a house flipper or wholesaler, the only way to win right now is to go direct to seller, or risk ending up with deals that pay you minimum wage after 6 months of hard work.
There are 2 major ways to generate leads in any business: via outbound marketing to cold leads, and inbound marketing for warm lead traffic.
So which leads are better, warm leads or cold leads?
How you might generate leads?
Focus on warm motivated seller leads first with a high converting investor website
Where do people who are looking to sell their house find you? Where they are looking: on Google, period.
Before you do anything, make sure that you have published a website to capture online motivated seller leads. Since ranking in Google can take at least 3-6 months, the sooner you do this, the sooner you can get started ranking for the terms that are important to you for eventual free motivated seller leads.
You lose 100% of the shots you don’t take, and so if you don’t have a website, you will lose out on 100% of the searches by these motivated sellers.
What are your options for a real estate investor website?
The DIY Solution
Although I would never recommend this, you can always build your own motivated seller website and host it on GoDaddy pretty cheaply. I only say it’s cheaply because although it might cost you less than $30 to start, that belies the extensive time and effort that will be required for you to build a site from scratch, write all of the content necessary to get it ranking in Google, and integrate it with your other house flipping systems.
If it takes you 3 months to build your website, and another 3-6 months for you to start ranking, you’re likely to be out of business before you even get one lead.
So you have to ask yourself: are you a web developer? Or are you a house flipper or wholesaler?
The 90% Solution (coming in REI/kit April 19th)
You can cut to the chase and reduce the time to get started from months down to minutes with a REI/kit real estate investor website that is pre-generated for you and uses the latest technology and content designed to help you rank as fast as possible. Although I cannot guarantee how long it will take you to rank, I can guarantee you that your choice of technology will not be the reason that you are not ranking.
The other important component of REI/kit investor websites is the integration of the website with the rest of the house flipping software. That means that any leads that come in through your website, you can immediately act upon using our extensive suite of due diligence tools and supporting data to really understand who the owner is, what they might owe on their house, and how much it might appraise for.
Want to speed up ranking for a price? If you are an advanced online marketer, you can build squeeze pages within REI/kit websites to drive paid online traffic of motivated seller leads.
The Cadillac Solution
For the same price as all of the tools in REI/kit combined including the website, you can get yourself a basic website from any one of the investor website companies.
Because they are website companies, not house flipping software companies, what you will get is more options for website designs, but you will still need to integrate with other platforms if you want your leads to go somewhere, for example.
Going this way starts getting into the business of solving for the wrong problems again.
Go after cold outbound leads next
This is where direct mail comes in, and you have to start with a lead source to send your mail to. Most software out there that is selling leads is actually reselling those leads from one of 2 or 3 major list sources of data.
I suggest you cut out the middleman and pull the leads direct from the source. Some leads you might want to pull are Absentee Owner, Absentee Owner Out of Area, High Equity Owners, Pre-Foreclosures.
One of the top resources for pulling lists, offered by data powerhouse CoreLogic, is ListSource.
Then you have to send them mail. What are your options here?
The DIY Solution is the 90% Solution (REI/kit)
I’m a huge fan of automation, but this is the one area where the DIY solution might be the best and most cost effective one for many people, depending on your negotiation skills.
Why the DIY solution?
Depending on the volume, you may be able to negotiate better rates at your local printer.
Since you may be only sending infrequently, every 3 weeks or so, doing your own printing or envelope stuffing may also be a significant cost savings, without a significant time investment.
You will also want to track your mail returns. You don’t want to be sending mail to an address that is undeliverable.
This is how I would approach with REI/kit.
First, I would pull a list of pre-foreclosure leads from ListSource. Then I would import those leads into REI/kit using our list upload tool. I would then tag subsets of the leads from that list referencing the particular messaging that I was intending to send out with direct mail campaign. Then I would export the tagged leads to either print your own mail and send it, or send the list to a mail fulfillment house of your choice.
So how does that translate into the appropriate qualities of software for flipping houses?
Rating software for lead generation
Poor quality house flipping software
Has no lead generation component at all. If you have no leads you have no house flipping business.
Better quality house flipping software
Has at least one or more way for you to generate leads. Inbound warm leads are better and the number one place that you need to be sending them with your marketing whether online or offline is to your website.
This is where REI/kit falls in as a value play where you get a website, and a way to manage the data and conversion of your leads in the CRM.
Best house flipping software
I have personally not found all in one software that performs all of these tasks well, so you will likely need to run several pieces of software in tandem.
Step 2: Due Diligence to Defend Your Margins and Profitability
Measure twice, cut once.
Some software providers out there would like you to believe that analysis is easy and to analyze a deal all you need is a calculator or a spreadsheet. That’s probably because their software is incapable of anything other than surface level analysis so that is what they want you to believe is all that you need.
Unfortunately, if you don’t spend the time and effort to get this right, it doesn’t matter how well you manage a project, you’re going to come out losing money in the end, killing your business.
The inverse of this is not true. If you get your valuations and margins right, then you can screw up a whole lot of things, and still come out on top.
This is precisely why we have so many HomeVestors franchisees as clients who use our expert analysis software despite having access to their own software in-house.
This is also why I have customers who tell me in private things like this: “I use your software to prevent me from cutting another check for an $84,000 mistake in property value”.
That right there my friends, is why I get up in the morning.
To evaluate whether the real estate investment software that you are looking at just gives you a plain calculator, or an extensive suite of tools to prove to you that you should be doing the deal, you have to first understand the characteristics of what makes up the best real estate investment software.
1) The best house flipping software uses appraisal tools and techniques to get an accurate ARV: If you do only one thing right, this is it.
2) The choice of comps data sources affects ARV by thousands of dollars. Use an app dependent on free Zillow data, and you will be throwing darts instead of performing an actual value analysis.
Data is what makes you an intelligent investor, and if you’re not paying for data you get what you pay for.
Rating software for accurate after repair value (ARV)
When the time comes to sell your rehabbed property, it is an appraiser that will determine the value for the buyer’s lender. For that reason, it is important that the software you choose to evaluate a potential deal uses standard appraisal techniques to help you come up with an after repair value.
Poor quality fix and flip software
Poor quality software will either take an automated valuation from a web site as gospel, or worse yet, take automated valuations from 3 different sources, average them out, and give you a number. This is problematic in a number of ways.
First, automated valuations, while always getting better due to ever improving machine-learning models, are still notoriously error prone and inaccurate.
Second, taking an average of 3 inaccurate numbers gives you an even more inaccurate number, essentially just giving you the average of 3 guesses. Even if one of the guesses was correct, the average will still point away from the correct number.
Any accuracy that you will get using this method is going to be by luck, which is not a great investment methodology.
Better fix and flip software
Better software gives you comps that you can select from, using the appropriate criteria. The criteria that you should use to select comps include comps that are at least:
- In the same neighborhood
- Within 10-20% of each other in terms of size
- Similar in terms of bedrooms, bathrooms, and other features
Best fix and flip software
The best software goes one step further beyond just finding comps, and gives you the ability to perform a sales comparison analysis. A sales comparison analysis is the technique that appraisers use to analyze comps. With this technique, not only do you select appropriate comps using the selection criteria above, but you also adjust for the market value of the major differences between your properties.
Most realtors won’t perform this step for you when they give you comps, yet this could mean a difference of thousands to hundreds of thousands of dollars in the final value of your property.
Rating software providers on their comps data
There are really only 2 places to get property data: from public record, and from the local MLS. Public record data can be found by going directly to the public record databases, whether they are online or offline, or by using third party data providers that aggregate this data either in a limited area or nationwide. These are data providers such as PropertyRadar (limited area), ListSource, and even Zillow.
MLS data is only available to licensed real estate professionals under very strict rules of access reserved for the purchase and sale of real estate.
Poor property flipping software
The worst kind of software is one where they tell you that they get MLS data from Zillow, as such a thing does not exist. If they are lying to you about that, then they are likely lying to you about everything else.
The second absolute worst software uses Zillow data to give you comps for a valuation. What they don’t know and don’t tell you is that Zillow will not provide the same comps to these software companies via their API as they have on their own site.
Any software that uses the Zillow API to provide comps is worse in my opinion than software that does not provide you with any comps at all.
Other poor software will just use the automated valuation of one of these services.
The Zillow API is free and in this instance, you get less than you paid for.
Better property flipping software
Better software includes software that provides you suggestions of comps from full and complete paid sources of the public record.
Best property flipping software
The best software allows to both use public record as well as MLS data in your analysis. Because of the difficulty in getting this data, this software is typically much more expensive. A good alternative is software that allows you to import free MLS data for your comps analysis.
REI/kit pulls a full set of premium public record data to ensure complete accuracy, and it also allows you to add your own data from outside MLS sources.
Rating property rehab estimation software
Property rehab estimation tools are often found within house flipping software, with varying abilities. The software you choose should allow you to estimate repair costs in a variety of ways, get construction costs from a reliable source, and give you enough costs to select from to get as precise an estimate as possible.
Poor property rehab software
Inadequate real estate rehab software, from a rehab construction costs standpoint, is one where they have not included any of the features mentioned above.
Many rehab estimation spreadsheets are just that, static spreadsheets with no data in them, only cells for you to enter your own costs that you found elsewhere. This is usually the case in what are called rehab estimation calculators.
Better property rehab software
The next step up from that is a rehab estimation spreadsheet with pre-filled construction costs. Those are usually static costs that are not updated once you download the spreadsheet, unless you purchase the spreadsheet again. If that spreadsheet only has costs for where that spreadsheet provider is located, or if the costs are not indexed – that is, costs for precisely where the property is located – the results will not be accurate.
Best property rehab software
The best house rehab software will allow you to enter your rehab costs in a variety of ways (including the ways mentioned above), at different levels of granularity:
If you are performing an initial analysis to see if the property is even worth visiting, you might have a number based on dollars per square foot. The software should let you enter one single number for rehab costs just to see if a deal has enough spread.
Broken down by system
When you first visit a property, you will generally perform a rough estimate of the major systems using a punch list. You would want to do this before you spend any serious time performing a detailed construction cost estimate to get a rough idea of the deal economics.
Here’s the rehab estimation punch list that we use while performing an initial walkthrough of a potential house flip:
Itemized construction cost estimate using nationwide costs data
After you have entered your initial estimate and the deal appears to still make sense, at this point the software should also allow you to create an itemized rehab cost estimate using a nationwide list of labor and material costs.
Rating real estate investment software for exit strategy analysis
What works for you now might not work for all investments, or future investments. The best software provides flexibility in determining your exit strategies, allowing you to model what a real estate investment property would return on your investment as a fix and flip, buy and hold, BRRRR, or wholesale, all in one interface.
Limited real estate investment software
Will focus on only one exit strategy.
Better real estate investment software
Will support multiple exit strategies, but the analysis will be limited.
Best real estate investment software
In addition to exit strategy analysis, you also want the ability to model multiple financial scenarios.
Rating real estate analysis software for flexibility in modeling scenarios
When real estate investors do an analysis on a property, much of it is simply adjusting the numbers to find the combination with the best financial outcome. The best software will have the flexibility to model multiple “what-if” scenarios, and break those numbers down into an itemized list, or override them with one single number.
For example, in a multi-family rental analysis scenario, the best software would let you to itemize income and expenses or override those inputs.
In the case of income, it would allow you to enter a flat rental amount for the entire property, or override that with an amount for each individual unit.
Similarly, for rehab improvement costs, it allows you to itemize down to the material level, or override costs with a single number. This enables you to see how the overall financial picture changes for each scenario.
Poor real estate analysis software
Probably only lets you enter a number as an input to your analysis.
Better real estate analysis software
Allows you to itemize your analysis inputs.
Allows you to either itemize your inputs, or override them with a general number.
Software that allows the capture of complex financing scenarios
The house flipping software you choose should allow you to model complex financial scenarios, not just basics such as down payment, rate, and term. These complex scenarios may include multiple loans, at different rates and holding periods, with a potential of profit sharing on the back end.
Poor real estate flipping software
Lets you add a number for financing.
Better real estate flipping software
Might let you add some loan characteristics such as rate and down payment.
Best real estate flipping software
Your software should allow you to determine the best financing method for a property, by modeling different scenarios such as the following:
Loan 1: 65% purchase price hard money purchase loan at 10% and 2 points, with $500 fees
Loan 2: 100% hard money construction costs at 10% and 2 points and no fees
Loan 4: 75% conventional refinance after 6-month seasoning period
Step 3 and 4: Get more of your deals financed and sold by showing the most important underwriting metrics and data
Your software should be able to produce reports based on the extensive analysis that you performed to defend your own reasoning, and include that data as part of a professional deal pitch, whether to lenders for funding, or to other investors for resale.
Each investment exit strategy has a set of metrics that the best software should be able to calculate, and also provide detailed reports to share with those lenders, partners, and buyers.
For house flipping, the most important metrics are profit, how much money is required out of pocket, what the return on investment (ROI) is, what the rate of return (ROR) is, and in some scenarios, the JV split.
For rental scenarios, the most important metrics are not only cash flow and cash on cash return (COC), but also the gross rent multiplier (GRM), the operating expense ratio, and the internal rate of return (IRR).
And for lenders, the more data that you have to support your valuation, and your rehab costs, the easier it is for them to fund the deal.
Rating a software’s ability to produce detailed reports
Poor real estate investing software
Only has one limited report for one specific exit strategy with limited information inside.
Better real estate investing software
May have multiple reports for different exit strategies and should contain the most important metrics for those strategies.
Should have multiple reports, with metrics specific to each strategy. Additionally, the reports should be configurable so that you control the data that is shared.
You get what you pay for
Building good quality software with good data is very expensive, so when you see free, or low cost software, there’s very likely a reason for this: their claims are probably exaggerated, and it has neither good data, nor the features that you need to help you honestly build your business.
So when you see free, or low cost software that claims to have the same features and benefits as software 10X the price, the simplest explanation is that it is only actually offering you 1/10th of the features, or that there are hidden fees.
Here are some expectations of software at different price levels:
You will typically just get a calculator, or any of the limited software qualities. When you pay very low amounts for software, it is being used to make it easy for you to be constantly upsold by the company for a much more expensive product or course.
TIP: This is not to be confused with the standard practice of free trials where you enter your credit card up front. Free trials are a great way to help you evaluate well-priced software where there’s no expectation for upsell to an expensive course.
You should generally avoid software that costs $1-$10.
You might get a small amount of the features under the better software category.
This software is good for beginners who are not sure yet if real estate investing is for them.
This usually falls into the toy or hobby software category and will not be adequate for you if you are looking to scale your business in a meaningful way.
The software is likely very good in respect to one or more features, and sometimes an up-and- coming company that is trying to get a foothold in the market. This software is often underpriced, and there is opportunity for early subscriber customers to get much more value in return for their money.
This software is good for beginner to intermediate investors who have committed to building their business, but may not have all of their systems in place, or enough money to spend on expensive software.
The software has solved a particular pain point very well, or is likely an established leader in their market, so they can command a premium.
In this post, I defined several key dimensions that the best house flipping software should have, to arm you with enough information to help you choose software with features and pricing that works for you with the ultimate goal of scaling your house flipping business. Sometimes it’s not as simple as relying on claims, and depending on your budget, might require compromise between price and features.
In the end and in most cases, you really do get what you pay for, so if you have an extremely limited budget, in my opinion you will be better off by not buying any software at all so as to avoid exaggerated claims, and constant upsells.
REIkit.com was created to overcome the poor quality of the real estate investment software on the market today, and a free trial is available for you to test out all of the features and see if it’s right for you.