How to Flip Properties in a Sellers’ Market

Flipping properties is one of the new,

hot things to do in the real estate world. Reality TV shows certainly make it seem like a fun and quick way to make some big bucks! And, especially in a seller’s market, flipping properties can potentially turn a good profit. The more you learn from Legacy’s Building Wealth Club, the more opportunities you’ll have to pursue your goals.

The basic concept of property flipping is to take a property that needs updates, purchase it at a low price, fix it all up and then sell at a significantly higher price to capture a nice profit. A seller’s market is when there are more buyers than there are homes, creating competition and driving the price up.

Let’s look at some considerations on how to flip properties in a seller’s market.

Advantages & disadvantages

Any investment has advantages and disadvantages, and flipping properties is no different. It’s important to carefully consider them before jumping in so that you can protect your investment and manage your risk. Here are a few of many advantages and disadvantages of this strategy.

Advantages

Seller’s market means potentially high selling prices and, therefore, high profits.
Buyers are interested in unique homes, driving demand (and profits) higher.
Flipping houses appeal to those who are creative, or enjoy building and designing.

Disadvantages

There is an inherent risk to any real estate investment.
The cost of building supplies and the time to complete renovations can be unpredictable. It could end up being more expensive and take longer than planned.
Real estate market can be unpredictable; the seller’s market may not last and prices could drop.

Ways to find deals

Every good flip starts with a good deal! It’s important to get a good initial deal on the property so that you can add value through renovations and updates and sell at a much higher price. Here are some ways to find deals:

Work with a real estate agent who knows the area and learns about deals early on. A realtor is a key member of your power team.
Look for foreclosed properties, which is when the owner fails to pay their mortgage and forfeits the rights to the property. Prices on foreclosed properties could give you a better ROI.

Find a community. There are so many real estate investment groups to plug into, such as online forums or groups on Facebook or local meetup groups. Try to find other like-minded people to share tips, tricks, and places to find deals on Legacy’s Building Wealth Club.
Search the MLS regularly. The Multiple Listing Service (MLS) is a database of houses for sale—look regularly on the specifics of the type of property you are looking for. Legacy Education also offers real estate software that can provide you with what your looking for in most cases.

Paying the right price

Once you find a good deal, or what you think may be one, it’s important to do your due diligence in order to pay the right price for it. Make sure you complete an inspection and take stock of what needs to be done. Often investors make their money on the purchase price, then calculating the After Repair Value (ARV) for the maximum ROI.

Then, come up with a financial budget for the renovations you will need to make. Be detailed and specific about what the costs will be and more importantly a reserve amount for the unexpected costs or issues typically found when making renovations. Finally, do some research about the potential selling price after your renovations so you have an idea of what you can list the property for. Comparable active listings and recently sold needs to be factored in. More importantly to any project is the amount of time it will take, pay close attention to the Days on Market (DOM). You’ll have to cover the costs for that amount of time or more in your budget.

After considering all these financial factors, you will be able to determine if you are paying the right price for the property.

Renovation tips

Renovation is the key component of house flipping. It can range from cosmetic changes like some new paint and cabinets to full tear-down operations. You need to first have a thorough understanding about what you will be doing before getting started. Consider these renovation tips:

Complete a thorough inspection so you are not surprised by anything.
Budget generously and make space for unexpected expenses.

Look at the prices of the materials you need and choose wisely.
Consider the buyer you are going to market to—do they want luxury furnishings that will command a higher selling price? Or is it for a middle-income family who needs functionality?
Expect delays and plan accordingly.
Utilize Contractors to ensure proper permits, task timelines and agreed budgets.

Property rehab is one way of many real estate

investing strategies to make a profit, especially in a seller’s market where the demand from buyers is high. This helps provide a brief overview of the things you should consider when deciding to flip properties. Carefully look at your options, come up with a plan, and then go out there and take action!

Areas of Review

Takeaway

Big picture takeaway points

There are advantages and disadvantages to flipping.
Your money is made in the deal. Never overpay for a property.
Have an idea of your rehab costs.

Reflection

Self-reflection questions to think more about the content

How do I know if I’m getting a good deal?
Have I evaluated the property thoroughly and done walk-throughs with my contractor?
What happens if there are larger issues? Do I have money set aside just in case?
Do I have a power team in place so I make can the right decision but also move quickly?

Join Legacy’s Building Wealth Club today and continue your journey. Let our education and experience lead the way!