3 Stellar Strategies: #2 Flipping

Hi Moguls - it’s my goal to present clear and simple real estate investing strategies—without all the extraneous, unnecessary info—to give you a roadmap for building your business.

Interested?

Then read on…

Matt Andrews back with you again with the 2^nd lesson in a 3-part series about Stellar Strategies. In the first part, we talked about Wholesaling. In that lesson, I not only gave you basic investing and wholesaling information, I also cited a few examples of some of my successful wholesale deals to whet your appetite and teach you using real-world examples.

So, from wholesaling, we move now to doing bigger deals, netting wider profit margins, by flipping houses. Flipping is when renovating and rehabbing come into play.

You—the investor—gain control of a property for the purpose of fixing it up to enhance the value, and then resell it for a profit. Flipping can take from 3 to 12 months to complete. A few rock stars can whip these out in a month; others on a larger scale might take up to two years.

These properties are being readied for owner-occupant buyers who, nearly always, are dependent on traditional financing. The goal then is two-fold. You want a rehabbed property that will appeal to buyers, and one that will be easily financed.

This is your key strategy in flipping.

Required Skills

With flipping, you must have the ability to manage construction crews. During the renovation, you will be filling the role of the project manager. You must stay on budget and manage a timeline. One of the biggest dangers in flipping is dealing with long-term holding costs. These expenses can eat up profits in a hurry.

Next, you have to deal with city and county code enforcement. Depending on your area, this could be a bad thing or a good thing.

In certain parts of Florida, it’s difficult to get renovation jobs done without county and city code enforcements holding up the work. They may threaten fines or ask for something that appears to be totally outrageous.

left-border Will you be able to deal with such situations?

And finally, you need an inside track with a number of Realtors in order to sell your properties. Build relationships so you’ll always have Realtor partners standing by to work with you.

Our Success Stories

Keep in mind there are different types of deals in different parts of the country, with different levels of profit.

To give you an idea of some actual deals, here are a few of ours…

The first one is in Seffner, FL and the lead came in by way of direct mail (yellow letters and postcards). The home was owned by an elderly woman who had lost her husband, and she was ready to move. We contracted the property for $53k, rehabbed it for $25k, so our total investment totaled $78k. We were able to sell it in less than 30 days for $110k. That means we pocketed a net profit of $27k. Not bad for just a little work.
Another great lead was in Tampa. It was a duplex with 2 bedrooms, 1 bathroom in each unit. We contracted it for $65k, rehabbed it for $25k for a total investment of $90k. It just needed landscaping and basic cosmetic work. Working with a Realtor partner, it was sold in less than 45 days for $125k for a net profit of $25,100.
We also had a deal in Land O Lakes, which was actually a short sale from the MLS. (These typically take a long time.) We contracted for $85k, and rehabbed for $15k. The total amount in the deal was $100k and we used short-term rehab funding. The selling price was $140k and netted us $31,900.
The last deal I’ll share came from a bird dog partner in Grand Rapids, MI. It was a large double lot with 2 houses on it. We contracted the whole lot with both houses for $65k and rehabbed for just $10k. Here’s the cool part… I was able to split up the lots (which at the outset I didn’t even know was possible!) and sold them separately. One sold for $40k, the other for $65k. The net profit came to $29,010.

Well, there you have it…

We’ve now covered wholesaling and flipping.

If you work your business the right way, you can build one upon the other. From here you can move into the Buy & Hold Strategy. We’ll cover this third part of the series in my next lesson.

See you then.