What makes a property a “flip”? As a general rule, a property that is bought and then sold again within 180 days is considered a “flip”.
Are you a “flipper”?
Our main strategy for real estate investing is to buy and hold, not sell, properties. Over time, the dividends you reap are huge. However, for short term cash infusion, flipping can definitely help your bottom line. Buying with a great discount, often the result of a short-sale or foreclosure, then renovating as needed and reselling quickly for profit is a good way to bring in cash to protect those long term holds.
However, buyer beware. In today’s economy, we’re finding increasing problems with flips. For example, a few years ago, we could buy, renovate and resell a home all within 90 days. Sweet! Kind of like the flip-it shows on TV. Now it’s a different story:
- Today, because of all the foreclosures and short-sales on the market, it’s hard to sell at a retail price. It’s even hard to sell at 10%-15% below retail value. Why? EVERYONE wants to buy at a discount, even if you’ve just spent a ton renovating your property. In the current market, you must buy well below market value in order to fix up a property, re-sell it at a discounted price, and still make a profit.
- It’s harder and harder for buyers to qualify for loans so there are fewer qualified buyers for your property. When you do find a qualified buyer, it is harder than ever to get them all the way to closing. Why? Lenders are far more cautious. They’re requiring more and more documentation from your buyer. I can’t say that I blame the banks for not wanting to lend; with interest rates as low as they are, banks don’t have much financial incentive to make loans.
- We all know it’s more difficult for buyers to qualify. What you may not know is that it’s also more difficult for sellers to sell. From the seller, lenders are often asking for proof (a list) of improvements made on the property (if your profit is more than 20% of your purchase price), more than one appraisal, more than one inspection, verification that the work was done by licensed contractors, and copies of permits.
With all of these additional requirements, you can see why flips can take 180 days (and longer) where they used to take 90.
Flips remain a great alternative for bringing in fast cash, just be aware that your costs will be higher than in the past, your profit margin will be lower, and the time frame for turning a flip is much longer.
If you haven’t yet done a flip, rather than getting your education from the TV flip-it shows (which can be very costly), find a coach guide you through your first one or two, a coach who’s done flips successfully.
What’s been your flipping experience?
Jul 6th, 2013 / 1:33 pm
Hi Walter:
So glad you found us!
To begin with, you will hook up with so many local investors. Our company bought 68 houses last year and probably 50 this year already. You can, no doubt, double that for the rest of the group. When an agent brings us a property that we rehab and flip, they also get to list it for sale.
I don’t know where you would be able to hook up with more potential business or learn about investing any easier than with this powerful group of investors.
Join us at our monthly meetings: https://www.meetup.com/Greensboro-Whol/
Hope to see you there!
Jul 6th, 2013 / 7:36 am
Hi Karen:
I’m really enjoying your blog. I have plans to flip a few houses this year. The information on your blog is informative and very useful. I was wondering if you could share with me, the benefits a real estate broker would experience from joining your Triad Mastermind group? I’ve been considering focusing on a niche of just working with investors. Thanks in advance for your assistance.
Oct 10th, 2011 / 9:47 am
Great, Alisha!
I will email you right away. Would love to have you participating!
Thanks for the inquiry.
Oct 9th, 2011 / 8:24 pm
I would really like to know more about your coaching program triad master mind please send me more info if at all possible Thank you.
Sep 10th, 2011 / 2:03 pm
Flipping is a good way to bring cash but you have to be able to buy low enough that you can fix them up, market them about 20% below value and still make a profit. If you market higher than that, they may not sell and your money could remain tied up long enough to pull you under. The skill is in buying right.
Wholesaling, same thing. You have to buy soooo low that you can sell to an investor who buys it from you cheap enough to make profit when they sell. With wholesaling, count on making $2000 – $5000 profit per deal.
Let me know how it goes!
Sep 10th, 2011 / 8:41 am
Hey Karen, just wondering if I should get into this flipping to get some quick cash? I like buy and hold, and that’s where I’d like to end up, but right now I’m looking at any an all options to create cash now! :)
I’ve been hearing about flipping houses for years now, and more recently of whole selling reo properties. Have you done or heard of this whole selling? I’m a local solepro realtor here and have been trying to keep afloat LITERALLY, lol!!! What’s your take on generating some, “quick cash” in this market? :)
Apr 8th, 2011 / 9:36 am
Congratulations on your purchase! And, yes, we buy or sell MUCH faster with cash. The lenders are the cog in the wheel…
And good luck with your cash flow! Hooray!
Apr 8th, 2011 / 9:26 am
I rarely flip houses. I am like most of us, buy and hold for the long term return. I did close on a new property last month in 12 days from acceptance to closing in the lawyers office. But it was a cash sale ith seller finance. Renovating now and hope to cashflow by July 1.
Jim Rumley
Area Real Estate & Property Management.