FIX AND FLIP STRATEGIES TO GET YOUR INVESTMENT PROPERTY SOLD
What Smart Tactics Can Help Real Estate Investors Go from Flip to Flip with Ease?
The profit from flipping just one property can be substantial. And some deals even eclipse the typical average annual earnings of other investments, making it a very attractive way to make a living. Most investors want to keep the machine turning properties quarter after quarter or even month after month. Getting from deal number one to flipping investment properties every month, or even dozens of properties every month, requires effective processes. How do you efficiently turn that first acquisition into a house-flipping cash snowball?
Tips for Fixing and Flipping Fast
Each real estate investment opportunity is only as good as the execution. For flippers, potential profit only becomes a reality when the rehab work is done, the property is resold, and the cash is firmly in hand. So, to convert opportunities efficiently and consistently, what are some of the smart rules that successful property flippers stick to?
Renovate to Your Target Market to Sell Fast
Would you put granite counters and stainless steel appliances in a cookie-cutter starter home? Gut instinct says no. But even as obvious as it seems, there are exceptions. For example, a cookie-cutter starter home in San Diego may command relatively low-cost upgrades, but the same style and size home in Boise couldn’t get you the same kind of return. Be smart with your renovation choices. Carefully consider who your buyer is: What are the buyer’s hot buttons and what are the must-haves that you can offer without breaking your rehab budget? With experience, you’ll know how to identify your target buyers and make even smarter rehab choices.
Here’s how you unlock profit with better processes:
1.Hit the ground running with boots on the job from day one. You should start your renovation plans long before closing.
2.Build strong relationships by managing and paying contractors well. A good team of contractors is critical to repeat flipping.
3.Don’t waste materials and tools because they’ll always come in handy later. Serial flippers have readily available tools and inventory to get the job done.
4.Commit to quality rehab work to preserve and build your reputation. That’s how you get buyers under contract before the project is even completed.
5.Be sure to include a marketing budget in your initial figures. In fact, check your numbers and check them again to make sure your project is on track financially.
6.Recognize the critical role that marketing plays in profit and resales.
When to Start Marketing for Resale
When is the right time to begin marketing to resell your flips? This can be the most contentious phase of the house-flipping process. Even the experts are often split on when to start marketing properties for sale.
Realtors are decidedly in favor of only beginning active advertising and showings after the property is 100 percent polished, cleaned, and often even staged. Of course, this works in the agent’s favor as it theoretically makes it a lot easier to sell at top dollar. That means more profit and commission for real estate agents.
However, every day means more holding costs that bleed money and profit. Some savvy rehabbers choose to begin marketing the opportunity from day one of the acquisition. Some may even market before that. The less you have to put in, and the less time it takes to resell, the lower the risk and the higher the profit potential. In many cases this may also be the ideal scenario for the buyer, because some buyers would rather complete improvements to their own tastes.
The downside of beginning to market too early is that some buyers may not have the imagination to envision the end product and value and are scared away from an unfinished project. It depends on the buyer and how you are able to present the property. If you can afford it, test out these options.
Choosing the Right Real Estate Marketing Formula for Your Deals
There’s more than one way to market an investment property for sale. Choosing the right path can depend on:
•Your location
•Your overall real estate investment strategy and business model
•Your funding arrangements and loan terms
•The specific property characteristics
•Current and trending market conditions
•Your deal numbers
•The ideal target buyers for this property
Reselling the Property
What, then, are some of the common ways to resell a property? How do they stack up compared to your needs and goals?
Listing Property with a Real Estate Agent
The right real estate agent can be an effective marketing partner. Several notable house-flipping personalities from reality shows like Flip This House use realtors to market and sell their properties. Other long-time investors have launched their own real estate brokerages to sell their properties. Even Warren Buffett jumped into the brokerage scene with Berkshire Hathaway Home Services. For the average investor, working with a local, knowledgeable agent can be a plus.
There are some downsides to listing properties with a realtor. Commission is a big one. You’ll have to decide for yourself what an agent’s service is worth. Plus, there will always be those who will negotiate fees. But perhaps even more significant is the time factor. If agents are trying to lock you up with a six- or twelve-month listing agreement, with no guarantee it will sell during that period, most flippers can’t afford that. Savvy flippers are trying to be in and out of deals in ninety days or less. Another factor is how long you have on your loan term. If you only have a six-month asset-based loan, you absolutely have no business in signing a twelve-month listing agreement.
There are upsides to working with agents, such as access to the multiple listing service (MLS) and a wider audience, and having a professional out there working for you. Just make sure you do the math carefully.
Some real estate investors choose to obtain their own real estate licenses. Again, carefully do the math on the costs and time demands. And watch for legal restrictions on your investment activities.
Hybrid Real Estate Services
There are hybrid services that can offer many of the same benefits of listing with a realtor, without the cost. These can generally be divided into two categories:
1.Flat-fee listing services offered by licensed real estate brokerages
2.For-sale-by-owner (FSBO) services
With around 60 percent of home sales happening via the MLS, the first option shouldn’t be dismissed. If you can list your property on the MLS for a couple hundred dollars, that may be smart usage of part of your real estate marketing budget. You’ll represent yourself as the seller and a buyer’s agent will bring the buyer. You’ll still have to offer commission to the buyer’s agent, but in most cases it’s half the cost of the typical MLS listing—because there is no seller’s agent commission. Before choosing this option, ask yourself if you realistically have the time and expertise to sell on your own.
FSBO services are also available. For-sale-by-owner websites and publications can offer another marketing avenue. When selling properties on your own without the services of a real estate agent, be sure you understand your contracts, deadlines, and commitments.
DIY Marketing
There are many ways that real estate investors can market their own properties for sale themselves. They include:
•Yard signs
•“Bandit” signs
•Newspaper and magazine ads
•Social media marketing
•Pay-per-click and other online marketing
All of these marketing methods work. They can all also run on their own cycles, becoming more or less effective during certain phases. In a strong seller’s market, sometimes all it takes is a yard sign or a Craigslist ad to sell a property in a few hours. In tough times it can take a lot more money and a lot more time.
The Buyers List
Serious real estate investors, who are eager to build robust deal flow and maximize profit while limiting risk, make building a buyers list a priority—especially when wholesaling properties. Put simply, if you have a list of qualified buyers eagerly waiting to purchase properties from you, investors can quickly and easily flip houses like clockwork.
As you are marketing your renovated properties, add as many qualified buyers to your list as possible. This can be done through premarketing the home to contacts made through your online marketing, such as Craigslist and social media, along with bandit sign and direct-mail campaigns.
The process of turning a property into profits is one that, when mastered, can generate a lot of income. Every investor takes a slightly different route to profits; the most successful investors have funding, a team, and a set of general “get it done” processes to take a project to completion.
TAKEAWAYS
The growth of your real estate investing depends on how you can scale your business. Flippers doing only one or two properties each year may not be concerned with scale. But those who want to grow must scale out.
What is your target annual flipping income? How many houses would you need to flip to get there? If it’s more than two, can you scale your business for multiple annual flips?