Flipping houses can be very profitable. Mainly because of the leverage the transaction provides. A tip to remember is to avoid seeing the prospective house through rose colored glasses. Personal preferences should be left at home, because all that matters is the numbers to a successful home flipper.
If you love real estate, it is an expensive taste to have because the time to be admiring of properties is when the work is done and you are shopping for your own personal habitat. When you have the fiscal capacity to have the luxury of actually enjoying the property for yourself. Until then you are strictly shopping for a market. You are searching for what you know your specialized niche want and need, which brings us to the tip I think will improve your prospects and your results greatly.
I am affiliated with a great many investors and a good proportion are active real estate investors. Some focus in more specialized areas like art, precious stones and sea going vessels. What I noticed about my property investor friends is many spend a lot of time searching. Does this sound familiar? I have seen many give up after a few months of this, quipping that they just can't find the property they are looking for.
In actual fact, this is an attitudinal problem and not a supply problem of appropriate flip deals. If you would repeat this with me as you read and remember it in your real estate career, we can both sleep sounder. Ready? "I am seeking to uncover a profit" Again! "I am seeking to uncover a profit"
Good, I feel a little better now. Now that I know you have said these words in your head, I know it might bounce around for a few minutes while you read the rest of this article.
You see, noticing imperfections in the property yourself will weaken your deal. Looking at the unmown grass and the falling apart letter box will make you willing to take less. The point is grass can be mown and letter boxes can be repaired fairly cheaply.
A property flipper, an expert property flipper deals in numbers. He can translate emotive factors like a messy porche and a garage full of junk into cold hard figures, like $230 and 1 days work. A retail buyer will look at these things and turn their nose up at the entire offer, no matter how cheap it is, they will subconciously tie in a garage full of junk with, "there is something wrong with the entire house" "Who knows whats wrong with it" Retail buyers want to buy emotively. Wholesale buyers want to buy logically.
As a flipper of properties, you want to buy wholesale and sell retail. However there is an imbetween. What if you don't have much money to do your first deal. You don't have the cash to put down in escrow. This is what many of the quitters I mentioned above suffered from but did not recognize it. They had some money, only a little, and they felt they could maybe do a flip if they found exactly the right property.
If they recognized their situation they would have taken my advice, the advice I am about to offer you. Yes there are retail buyers, yes there are wholesale buyers who are cashed up. Then there is the hybrid. This buyer has little money but plenty of time and enormous enthusiasm.
A hybrid buyer usually sells to a wholesaler. For example a mom and pop investor is a wholesaler. They want to buy and rent out properties for long term capital gains and a little cash flow. So they generally are very picky about price, but not so picky that they would not pay a few percentage points over wholesale. Thats where you come in.
You do not buy the property, which immediately means you don't incur stamp duty and a host of costs that the wholesaler will incur. All you are doing is finding properties and presenting them to the wholesaler in a way that it makes it appealing for them to buy. Things like a list of likely repairs and the estimated costs, all ordinary fees and charges and practically everything about the property on a fact sheet.
You will need a few special forms that commits the seller, so your wholesaler cannot go around you and take your 5% or so, but apart from that you are a free agent.
The real tip is this. These mom and pop wholesale buyers are just one type of buyer. They buy multiple properties per year not just one. You must foster links with maybe 20-30 of these wholesalers. You should keep in constant touch with them and offer them fact sheets nearly every week. Not all will be ready to buy when you have something to sell, but sometimes, you will hit one in just the right way and even if they are imbetween deals, they may still take yours on too because it was right up their alley.
Of course, the real beauty of this is that if you fail to interest anybody, you lose nothing. The 10 days or whatever you negotiated to control the property has passed and you failed to find a buyer, nobody lost a thing and you had a chance to pick up a quick and clean $5,000 to $40,000 in a weeks work. It's a numbers game.
A car, some gas and a newspaper is all you need.