Let’s talk about flipping houses.
Flipping houses can be an attractive short term investment, but it’s not as easy as it may initially seem. Probably the single most difficult part of flipping houses is actually finding worthwhile deals.
Off-Market Properties
One of the best ways to find houses worth fixing and flipping is to find off market properties. You can find these properties by going through friends and family, using your network to find someone looking to sell their home quickly or get rid of a property.
We also have a company that searches for off market deals. The best way to find distressed properties is by becoming good friends with public and municipal records.
With these records we can find homes in probate, homes left to heirs who may not live nearby and want to let go of the property, recent divorces that may result in a home on the market, foreclosures, etc. There are a number of different signs that can indicate a potential off market property.
Make An Offer
Once you find records suggesting an off-market home you need to reach out to the current owner, whether through phone, mailing addresses, or email. We personally use direct mail and send postcards or letters.
If we have their phone numbers we may call or text in hopes that they pick up or respond. People looking to sell their off market properties can even find me online at mvpgainesville.com. The true key to finding off market properties for a flip is willingness to search.
Can You Flip it?
Finding the market deal is only half the battle. Once you’ve found an available property it’s time to decide whether or not it’s going to have enough equity in the property to make a good fix and flip opportunity.
A good rule to follow when calculating whether a flip is worth the investment is the industry standard 70% rule. Take the after repair value (ARV) — the value that you feel the property will sell for once it’s on the market — and take 70% of that value. If the ARV is $100,000, then you would take $70,000 and then subtract your repairs from that number. So if repairs cost 30,000, that leaves you with a final figure of $40,000, which is the amount an investor would most likely want to pay for that property.
Not every investor works off the 70% rule, it’s more or less a guideline — investors who do a lot of volume may not require as much profit on each deal. Regardless of how you calculate your returns, you should go into each flip knowing your projected repair costs and after repair values.
Flipping houses can seem like fast money, and it can be -- but you need to know what you’re doing to make a successful profit. Take every opportunity to learn from others and possibly partner with someone who’s done it before. It’s important to hone your understanding of searching for the right deals.